Correlation Between Vanguard Mid-cap and Cambiar Smid

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

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

Diversification Opportunities for Vanguard Mid-cap and Cambiar Smid

0.53

Correlation Coefficient

Vanguard Mid-cap  Cambiar Smid

Very weak diversification

The 3 months correlation between Vanguard and Cambiar is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Cambiar Smid Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambiar Smid and Vanguard Mid-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 Mid Cap Index are associated (or correlated) with Cambiar Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambiar Smid has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Cambiar Smid go up and down completely randomly.

Pair Corralation between Vanguard Mid-cap and Cambiar Smid

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.71 times more return on investment than Cambiar Smid. However, Vanguard Mid Cap Index is 1.42 times less risky than Cambiar Smid. It trades about 0.04 of its potential returns per unit of risk. Cambiar Smid Fund is currently generating about -0.12 per unit of risk. If you would invest  32,400  in Vanguard Mid Cap Index on October 7, 2024 and sell it today you would earn a total of  673.00  from holding Vanguard Mid Cap Index or generate 2.08% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Cambiar Smid Fund

Vanguard Mid Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cambiar Smid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambiar Smid Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Vanguard Mid-cap and Cambiar Smid

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

The idea behind Vanguard Mid Cap Index and Cambiar Smid 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.