Correlation Between American Funds and Vanguard Inflation
Can any of the company-specific risk be diversified away by investing in both American Funds and Vanguard Inflation 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 American Funds and Vanguard Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Inflation and Vanguard Inflation Protected Securities, you can compare the effects of market volatilities on American Funds and Vanguard Inflation 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 American Funds with a short position of Vanguard Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Vanguard Inflation.
Diversification Opportunities for American Funds and Vanguard Inflation
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Vanguard is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Vanguard Inflation Protected S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Inflation and American Funds 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 American Funds Inflation are associated (or correlated) with Vanguard Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Inflation has no effect on the direction of American Funds i.e., American Funds and Vanguard Inflation go up and down completely randomly.
Pair Corralation between American Funds and Vanguard Inflation
Assuming the 90 days horizon American Funds Inflation is expected to under-perform the Vanguard Inflation. In addition to that, American Funds is 1.02 times more volatile than Vanguard Inflation Protected Securities. It trades about -0.15 of its total potential returns per unit of risk. Vanguard Inflation Protected Securities is currently generating about -0.14 per unit of volatility. If you would invest 2,284 in Vanguard Inflation Protected Securities on January 20, 2024 and sell it today you would lose (24.00) from holding Vanguard Inflation Protected Securities or give up 1.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds Inflation vs. Vanguard Inflation Protected S
Performance |
| Timeline |
| American Funds Inflation |
| Vanguard Inflation |
American Funds and Vanguard Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Vanguard Inflation
The main advantage of trading using opposite American Funds and Vanguard Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Vanguard Inflation 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 Vanguard Inflation will offset losses from the drop in Vanguard Inflation's long position.| American Funds vs. Blackrock Science Technology | American Funds vs. Specialized Technology Fund | American Funds vs. Janus Global Technology | American Funds vs. Dreyfus Technology Growth |
| Vanguard Inflation vs. Vanguard Short Term Investment Grade | Vanguard Inflation vs. Vanguard High Yield Porate | Vanguard Inflation vs. Vanguard Gnma Fund | Vanguard Inflation vs. Vanguard Reit Index |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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