Correlation Between Caldwell Orkin and Vanguard Balanced

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

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

Diversification Opportunities for Caldwell Orkin and Vanguard Balanced

0.84

Correlation Coefficient

Caldwell Orkin  Vanguard Balanced

Very poor diversification

The 3 months correlation between Caldwell and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caldwell Orkin Market and Vanguard Balanced Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Balanced Index and Caldwell Orkin 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 Caldwell Orkin Market are associated (or correlated) with Vanguard Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Balanced Index has no effect on the direction of Caldwell Orkin i.e., Caldwell Orkin and Vanguard Balanced go up and down completely randomly.

Pair Corralation between Caldwell Orkin and Vanguard Balanced

Assuming the 90 days horizon Caldwell Orkin Market is expected to generate 2.04 times more return on investment than Vanguard Balanced. However, Caldwell Orkin is 2.04 times more volatile than Vanguard Balanced Index. It trades about -0.01 of its potential returns per unit of risk. Vanguard Balanced Index is currently generating about -0.05 per unit of risk. If you would invest  5,056  in Caldwell Orkin Market on December 22, 2024 and sell it today you would lose (80.00) from holding Caldwell Orkin Market or give up 1.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Caldwell Orkin Market  vs.  Vanguard Balanced Index

Caldwell Orkin Market

Risk-Adjusted Performance

Very Weak

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

Vanguard Balanced Index

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Caldwell Orkin and Vanguard Balanced

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

The idea behind Caldwell Orkin Market and Vanguard Balanced 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.