Correlation Between Vanguard Mid and Cb Large

Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and Cb Large 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 Cb Large 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 Cb Large Cap, you can compare the effects of market volatilities on Vanguard Mid and Cb Large 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 Cb Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Cb Large.

Diversification Opportunities for Vanguard Mid and Cb Large

0.92

Correlation Coefficient

Vanguard Mid  Cb Large

Almost no diversification

The 3 months correlation between Vanguard and CBLSX is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Cb Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cb Large Cap 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 Index are associated (or correlated) with Cb Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cb Large Cap has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Cb Large go up and down completely randomly.

Pair Corralation between Vanguard Mid and Cb Large

Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 1.24 times more return on investment than Cb Large. However, Vanguard Mid is 1.24 times more volatile than Cb Large Cap. It trades about 0.16 of its potential returns per unit of risk. Cb Large Cap is currently generating about 0.04 per unit of risk. If you would invest  34,846  in Vanguard Mid Cap Index on September 17, 2024 and sell it today you would earn a total of  2,447  from holding Vanguard Mid Cap Index or generate 7.02% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Cb Large Cap

Vanguard Mid Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cb Large Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cb Large Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cb Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Mid and Cb Large

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

The idea behind Vanguard Mid Cap Index and Cb Large Cap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.