Correlation Between Vanguard Small and Ancora Microcap

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

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

Diversification Opportunities for Vanguard Small and Ancora Microcap

0.97

Correlation Coefficient

Vanguard Small  Ancora Microcap

Almost no diversification

The 3 months correlation between Vanguard and Ancora is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Ancora Microcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ancora Microcap and Vanguard Small 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 Small Cap Value are associated (or correlated) with Ancora Microcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ancora Microcap has no effect on the direction of Vanguard Small i.e., Vanguard Small and Ancora Microcap go up and down completely randomly.

Pair Corralation between Vanguard Small and Ancora Microcap

Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.0 times more return on investment than Ancora Microcap. However, Vanguard Small is 1.0 times more volatile than Ancora Microcap Fund. It trades about 0.18 of its potential returns per unit of risk. Ancora Microcap Fund is currently generating about 0.14 per unit of risk. If you would invest  4,640  in Vanguard Small Cap Value on September 3, 2024 and sell it today you would earn a total of  546.00  from holding Vanguard Small Cap Value or generate 11.77% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Ancora Microcap Fund

Vanguard Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ancora Microcap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ancora Microcap Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ancora Microcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Small and Ancora Microcap

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

The idea behind Vanguard Small Cap Value and Ancora Microcap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.