Correlation Between Vanguard Mid and Cambria Shareholder

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

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

Diversification Opportunities for Vanguard Mid and Cambria Shareholder

0.78

Correlation Coefficient

Vanguard Mid  Cambria Shareholder

Poor diversification

The 3 months correlation between Vanguard and Cambria is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and Cambria Shareholder Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Shareholder Yield and Vanguard Mid 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 Value are associated (or correlated) with Cambria Shareholder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Shareholder Yield has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Cambria Shareholder go up and down completely randomly.

Pair Corralation between Vanguard Mid and Cambria Shareholder

Considering the 90-day investment horizon Vanguard Mid Cap Value is expected to generate 0.82 times more return on investment than Cambria Shareholder. However, Vanguard Mid Cap Value is 1.22 times less risky than Cambria Shareholder. It trades about -0.01 of its potential returns per unit of risk. Cambria Shareholder Yield is currently generating about -0.08 per unit of risk. If you would invest  16,388  in Vanguard Mid Cap Value on December 26, 2024 and sell it today you would lose (115.00) from holding Vanguard Mid Cap Value or give up 0.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Vanguard Mid Cap Value  vs.  Cambria Shareholder Yield

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

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

Cambria Shareholder Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambria Shareholder Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Cambria Shareholder 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 Mid and Cambria Shareholder

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

The idea behind Vanguard Mid Cap Value and Cambria Shareholder Yield 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.