Correlation Between Vanguard Explorer and Saratoga Small

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Can any of the company-specific risk be diversified away by investing in both Vanguard Explorer and Saratoga 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 Saratoga Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Explorer and Saratoga Small Capitalization, you can compare the effects of market volatilities on Vanguard Explorer and Saratoga 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 Saratoga Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Explorer and Saratoga Small.

Diversification Opportunities for Vanguard Explorer and Saratoga Small

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Vanguard and Saratoga is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Explorer and Saratoga Small Capitalization in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saratoga Small Capit 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 are associated (or correlated) with Saratoga Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saratoga Small Capit has no effect on the direction of Vanguard Explorer i.e., Vanguard Explorer and Saratoga Small go up and down completely randomly.

Pair Corralation between Vanguard Explorer and Saratoga Small

Assuming the 90 days horizon Vanguard Explorer is expected to under-perform the Saratoga Small. In addition to that, Vanguard Explorer is 1.11 times more volatile than Saratoga Small Capitalization. It trades about -0.2 of its total potential returns per unit of risk. Saratoga Small Capitalization is currently generating about -0.19 per unit of volatility. If you would invest  590.00  in Saratoga Small Capitalization on July 5, 2022 and sell it today you would lose (37.00)  from holding Saratoga Small Capitalization or give up 6.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Explorer  vs.  Saratoga Small Capitalization

 Performance (%) 
       Timeline  
Vanguard Explorer 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Explorer 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.

Vanguard Price Channel

Saratoga Small Capit 
Saratoga Performance
0 of 100
Over the last 90 days Saratoga Small Capitalization has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Saratoga Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Saratoga Price Channel

Vanguard Explorer and Saratoga Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Explorer and Saratoga Small

The main advantage of trading using opposite Vanguard Explorer and Saratoga Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Explorer position performs unexpectedly, Saratoga 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 Saratoga Small will offset losses from the drop in Saratoga Small's long position.
The idea behind Vanguard Explorer and Saratoga Small Capitalization 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.
Saratoga Small vs. Vanguard Explorer
Check out your portfolio center. 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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