Correlation Between Vanguard and Cambria Micro
Can any of the company-specific risk be diversified away by investing in both Vanguard and Cambria Micro 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 and Cambria Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP Small Cap and Cambria Micro And, you can compare the effects of market volatilities on Vanguard and Cambria Micro 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 with a short position of Cambria Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Cambria Micro.
Diversification Opportunities for Vanguard and Cambria Micro
0.97 | Correlation Coefficient |
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 SP Small Cap and Cambria Micro And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Micro And and Vanguard 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 SP Small Cap are associated (or correlated) with Cambria Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Micro And has no effect on the direction of Vanguard i.e., Vanguard and Cambria Micro go up and down completely randomly.
Pair Corralation between Vanguard and Cambria Micro
Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 1.14 times more return on investment than Cambria Micro. However, Vanguard is 1.14 times more volatile than Cambria Micro And. It trades about 0.06 of its potential returns per unit of risk. Cambria Micro And is currently generating about 0.06 per unit of risk. If you would invest 7,944 in Vanguard SP Small Cap on August 31, 2024 and sell it today you would earn a total of 2,143 from holding Vanguard SP Small Cap or generate 26.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 61.5% |
| Values | Daily Returns |
Vanguard SP Small Cap vs. Cambria Micro And
Performance |
| Timeline |
| Vanguard SP Small |
| Cambria Micro And |
Vanguard and Cambria Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Cambria Micro
The main advantage of trading using opposite Vanguard and Cambria Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, Cambria Micro 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 Micro will offset losses from the drop in Cambria Micro's long position.| Vanguard vs. Vanguard Small Cap Value | Vanguard vs. Dimensional Targeted Value | Vanguard vs. iShares SP Small Cap | Vanguard vs. SPDR SP 600 |
| Cambria Micro vs. Vanguard Small Cap Value | Cambria Micro vs. Dimensional Targeted Value | Cambria Micro vs. iShares SP Small Cap | Cambria Micro vs. SPDR SP 600 |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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