Correlation Between Cardinal Small and Vanguard Value

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

By analyzing existing cross correlation between Cardinal Small Cap and Vanguard Value Index, you can compare the effects of market volatilities on Cardinal Small and Vanguard Value 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 Cardinal Small with a short position of Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Small and Vanguard Value.

Diversification Opportunities for Cardinal Small and Vanguard Value

-0.34

Correlation Coefficient

Cardinal Small  Vanguard Value

Very good diversification

The 3 months correlation between Cardinal and Vanguard is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Small Cap and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index and Cardinal Small 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 Cardinal Small Cap are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Cardinal Small i.e., Cardinal Small and Vanguard Value go up and down completely randomly.

Pair Corralation between Cardinal Small and Vanguard Value

Assuming the 90 days horizon Cardinal Small Cap is expected to under-perform the Vanguard Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Cardinal Small Cap is 3.97 times less risky than Vanguard Value. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Vanguard Value Index is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,634  in Vanguard Value Index on September 4, 2024 and sell it today you would earn a total of  414.00  from holding Vanguard Value Index or generate 6.24% return on investment over 90 days.

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

Cardinal Small Cap  vs.  Vanguard Value Index

Cardinal Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Value Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Small and Vanguard Value

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

The idea behind Cardinal Small Cap and Vanguard Value Index 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.