Correlation Between Vanguard 500 and Intrepid Capital

Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Intrepid Capital 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 500 and Intrepid Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard 500 Index and Intrepid Capital Fund, you can compare the effects of market volatilities on Vanguard 500 and Intrepid Capital 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 500 with a short position of Intrepid Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Intrepid Capital.

Diversification Opportunities for Vanguard 500 and Intrepid Capital

0.95

Correlation Coefficient

Vanguard 500  Intrepid Capital

Almost no diversification

The 3 months correlation between Vanguard and Intrepid is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Intrepid Capital Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intrepid Capital and Vanguard 500 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 500 Index are associated (or correlated) with Intrepid Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intrepid Capital has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Intrepid Capital go up and down completely randomly.

Pair Corralation between Vanguard 500 and Intrepid Capital

Assuming the 90 days horizon Vanguard 500 is expected to generate 1.07 times less return on investment than Intrepid Capital. In addition to that, Vanguard 500 is 1.2 times more volatile than Intrepid Capital Fund. It trades about 0.18 of its total potential returns per unit of risk. Intrepid Capital Fund is currently generating about 0.23 per unit of volatility. If you would invest  1,205  in Intrepid Capital Fund on September 16, 2024 and sell it today you would earn a total of  100.00  from holding Intrepid Capital Fund or generate 8.3% return on investment over 90 days.

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

Vanguard 500 Index  vs.  Intrepid Capital Fund

Vanguard 500 Index

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard 500 Index are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard 500 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Intrepid Capital

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Capital Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Intrepid Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard 500 and Intrepid Capital

The main advantage of trading using opposite Vanguard 500 and Intrepid Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Intrepid Capital 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 Intrepid Capital will offset losses from the drop in Intrepid Capital's long position.

The idea behind Vanguard 500 Index and Intrepid Capital Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.