Correlation Between FibroGen and Vanguard Bond

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

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

Diversification Opportunities for FibroGen and Vanguard Bond

0.46

Correlation Coefficient

FibroGen  Vanguard Bond

Very weak diversification

The 3 months correlation between FibroGen and Vanguard is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding FibroGen and Vanguard Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Bond Index and FibroGen 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 FibroGen are associated (or correlated) with Vanguard Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Bond Index has no effect on the direction of FibroGen i.e., FibroGen and Vanguard Bond go up and down completely randomly.

Pair Corralation between FibroGen and Vanguard Bond

Assuming the 90 days trading horizon FibroGen is expected to generate 5.16 times more return on investment than Vanguard Bond. However, FibroGen is 5.16 times more volatile than Vanguard Bond Index. It trades about 0.03 of its potential returns per unit of risk. Vanguard Bond Index is currently generating about 0.07 per unit of risk. If you would invest  1,508  in FibroGen on October 5, 2024 and sell it today you would lose (313.00) from holding FibroGen or give up 20.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.23%
Values	Daily Returns

FibroGen  vs.  Vanguard Bond Index

FibroGen

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FibroGen are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, FibroGen showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Bond Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Bond Index are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Vanguard Bond may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FibroGen and Vanguard Bond

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

The idea behind FibroGen and Vanguard Bond 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.