Correlation Between Vanguard Total and Cambria Foreign

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

By analyzing existing cross correlation between Vanguard Total Bond and Cambria Foreign Shareholder, you can compare the effects of market volatilities on Vanguard Total and Cambria Foreign 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 Total with a short position of Cambria Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Cambria Foreign.

Diversification Opportunities for Vanguard Total and Cambria Foreign

0.63

Correlation Coefficient

Vanguard Total  Cambria Foreign

Poor diversification

The 3 months correlation between Vanguard and Cambria is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Cambria Foreign Shareholder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Foreign Shar and Vanguard Total 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 Total Bond are associated (or correlated) with Cambria Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Foreign Shar has no effect on the direction of Vanguard Total i.e., Vanguard Total and Cambria Foreign go up and down completely randomly.

Pair Corralation between Vanguard Total and Cambria Foreign

Considering the 90-day investment horizon Vanguard Total Bond is expected to generate 0.36 times more return on investment than Cambria Foreign. However, Vanguard Total Bond is 2.81 times less risky than Cambria Foreign. It trades about -0.15 of its potential returns per unit of risk. Cambria Foreign Shareholder is currently generating about -0.07 per unit of risk. If you would invest  7,496  in Vanguard Total Bond on September 14, 2024 and sell it today you would lose (226.50) from holding Vanguard Total Bond or give up 3.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Vanguard Total Bond  vs.  Cambria Foreign Shareholder

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cambria Foreign Shar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Foreign Shareholder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Cambria Foreign is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Total and Cambria Foreign

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

The idea behind Vanguard Total Bond and Cambria Foreign Shareholder 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.