Correlation Between Vanguard Small-cap and Vanguard Explorer
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap 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 Vanguard Small-cap and Vanguard Explorer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Growth and Vanguard Explorer Fund, you can compare the effects of market volatilities on Vanguard Small-cap 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 Vanguard Small-cap with a short position of Vanguard Explorer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Vanguard Explorer.
Diversification Opportunities for Vanguard Small-cap and Vanguard Explorer
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Vanguard Explorer Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer and Vanguard Small-cap 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 Growth 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 Vanguard Small-cap i.e., Vanguard Small-cap and Vanguard Explorer go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Vanguard Explorer
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 1.16 times less return on investment than Vanguard Explorer. But when comparing it to its historical volatility, Vanguard Small Cap Growth is 1.0 times less risky than Vanguard Explorer. It trades about 0.15 of its potential returns per unit of risk. Vanguard Explorer Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 11,427 in Vanguard Explorer Fund on June 6, 2025 and sell it today you would earn a total of 435.00 from holding Vanguard Explorer Fund or generate 3.81% 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 Growth vs. Vanguard Explorer Fund
Performance |
| Timeline |
| Vanguard Small Cap |
| Vanguard Explorer |
Vanguard Small-cap and Vanguard Explorer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Vanguard Explorer
The main advantage of trading using opposite Vanguard Small-cap and Vanguard Explorer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap 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 Vanguard Small Cap Growth 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.
| Vanguard Explorer vs. Vanguard Materials Index | Vanguard Explorer vs. Vanguard Limited Term Tax Exempt | Vanguard Explorer vs. Vanguard Limited Term Tax Exempt | Vanguard Explorer vs. Vanguard Global Minimum |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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