Correlation Between Kennedy Capital and Vanguard Explorer

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

Diversification Opportunities for Kennedy Capital and Vanguard Explorer

KennedyVanguardDiversified AwayKennedyVanguardDiversified Away100%
0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Kennedy and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Kennedy Capital Small and Vanguard Explorer Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer and Kennedy Capital 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 Kennedy Capital Small are associated (or correlated) with Vanguard Explorer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Explorer has no effect on the direction of Kennedy Capital i.e., Kennedy Capital and Vanguard Explorer go up and down completely randomly.

Pair Corralation between Kennedy Capital and Vanguard Explorer

Assuming the 90 days horizon Kennedy Capital Small is expected to generate 1.32 times more return on investment than Vanguard Explorer. However, Kennedy Capital is 1.32 times more volatile than Vanguard Explorer Fund. It trades about 0.04 of its potential returns per unit of risk. Vanguard Explorer Fund is currently generating about 0.03 per unit of risk. If you would invest  1,234  in Kennedy Capital Small on September 26, 2024 and sell it today you would earn a total of  32.00  from holding Kennedy Capital Small or generate 2.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.44%
ValuesDaily Returns

Kennedy Capital Small  vs.  Vanguard Explorer Fund

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20246810
JavaScript chart by amCharts 3.21.15KGROX VEXRX
       Timeline  
Kennedy Capital Small 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Kennedy Capital Small are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Kennedy Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1212.212.412.612.81313.213.413.6
Vanguard Explorer 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Explorer Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec114116118120122124

Kennedy Capital and Vanguard Explorer Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.3-3.22-2.14-1.060.01831.082.183.284.38 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15KGROX VEXRX
       Returns  

Pair Trading with Kennedy Capital and Vanguard Explorer

The main advantage of trading using opposite Kennedy Capital and Vanguard Explorer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kennedy Capital position performs unexpectedly, Vanguard Explorer 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 Vanguard Explorer will offset losses from the drop in Vanguard Explorer's long position.
The idea behind Kennedy Capital Small and Vanguard Explorer 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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