Correlation Between Vanguard Explorer and Simt Small

Can any of the company-specific risk be diversified away by investing in both Vanguard Explorer and Simt Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Explorer and Simt Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Explorer Fund and Simt Small Cap, you can compare the effects of market volatilities on Vanguard Explorer and Simt Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Explorer with a short position of Simt Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Explorer and Simt Small.

Diversification Opportunities for Vanguard Explorer and Simt Small

0.91

Correlation Coefficient

Vanguard Explorer  Simt Small

Almost no diversification

The 3 months correlation between Vanguard and Simt is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Explorer Fund and Simt Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Small Cap and Vanguard Explorer is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Explorer Fund are associated (or correlated) with Simt Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Small Cap has no effect on the direction of Vanguard Explorer i.e., Vanguard Explorer and Simt Small go up and down completely randomly.

Pair Corralation between Vanguard Explorer and Simt Small

Assuming the 90 days horizon Vanguard Explorer Fund is expected to generate 0.85 times more return on investment than Simt Small. However, Vanguard Explorer Fund is 1.17 times less risky than Simt Small. It trades about -0.28 of its potential returns per unit of risk. Simt Small Cap is currently generating about -0.26 per unit of risk. If you would invest  12,100  in Vanguard Explorer Fund on October 9, 2024 and sell it today you would lose (1,213) from holding Vanguard Explorer Fund or give up 10.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Explorer Fund  vs.  Simt Small Cap

Vanguard Explorer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Explorer Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Explorer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Simt Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simt Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Simt Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Explorer and Simt Small

The main advantage of trading using opposite Vanguard Explorer and Simt Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Explorer position performs unexpectedly, Simt Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Simt Small will offset losses from the drop in Simt Small's long position.

The idea behind Vanguard Explorer Fund and Simt Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.