Correlation Between Kennedy Capital and Vanguard Explorer
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
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.44% |
Values | Daily Returns |
Kennedy Capital Small vs. Vanguard Explorer Fund
Performance |
Timeline |
Kennedy Capital Small |
Vanguard Explorer |
Kennedy Capital and Vanguard Explorer Volatility Contrast
Predicted Return Density |
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.Kennedy Capital vs. Kennedy Capital Small | ||
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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 the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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