Correlation Between Vanguard Value and Cabana Target

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

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

Diversification Opportunities for Vanguard Value and Cabana Target

0.78

Correlation Coefficient

Vanguard Value  Cabana Target

Poor diversification

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

Pair Corralation between Vanguard Value and Cabana Target

Considering the 90-day investment horizon Vanguard Value is expected to generate 1.17 times less return on investment than Cabana Target. But when comparing it to its historical volatility, Vanguard Value Index is 1.2 times less risky than Cabana Target. It trades about 0.06 of its potential returns per unit of risk. Cabana Target Leading is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,039  in Cabana Target Leading on December 20, 2024 and sell it today you would earn a total of  62.00  from holding Cabana Target Leading or generate 3.04% return on investment over 90 days.

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

Vanguard Value Index  vs.  Cabana Target Leading

Vanguard Value Index

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cabana Target Leading

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cabana Target Leading are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cabana Target is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Value and Cabana Target

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

The idea behind Vanguard Value Index and Cabana Target Leading 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.