Correlation Between Vanguard FTSE and Cambria Global

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

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

Diversification Opportunities for Vanguard FTSE and Cambria Global

0.97

Correlation Coefficient

Vanguard FTSE  Cambria Global

Almost no diversification

The 3 months correlation between Vanguard and Cambria is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and Cambria Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Global Value and Vanguard FTSE 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 FTSE Emerging are associated (or correlated) with Cambria Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Global Value has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Cambria Global go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Cambria Global

Considering the 90-day investment horizon Vanguard FTSE Emerging is expected to under-perform the Cambria Global. In addition to that, Vanguard FTSE is 1.03 times more volatile than Cambria Global Value. It trades about -0.34 of its total potential returns per unit of risk. Cambria Global Value is currently generating about -0.27 per unit of volatility. If you would invest  2,166  in Cambria Global Value on October 8, 2024 and sell it today you would lose (80.00) from holding Cambria Global Value or give up 3.69% of portfolio value over 90 days.

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

Vanguard FTSE Emerging  vs.  Cambria Global Value

Vanguard FTSE Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard FTSE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cambria Global Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Global Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cambria Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard FTSE and Cambria Global

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

The idea behind Vanguard FTSE Emerging and Cambria Global Value 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.