Correlation Between Vanguard California and AMC Entertainment
Can any of the company-specific risk be diversified away by investing in both Vanguard California and AMC Entertainment 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 California and AMC Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard California Intermediate Term and AMC Entertainment Holdings, you can compare the effects of market volatilities on Vanguard California and AMC Entertainment 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 California with a short position of AMC Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and AMC Entertainment.
Diversification Opportunities for Vanguard California and AMC Entertainment
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and AMC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Intermedia and AMC Entertainment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Entertainment and Vanguard California 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 California Intermediate Term are associated (or correlated) with AMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Entertainment has no effect on the direction of Vanguard California i.e., Vanguard California and AMC Entertainment go up and down completely randomly.
Pair Corralation between Vanguard California and AMC Entertainment
Assuming the 90 days horizon Vanguard California Intermediate Term is expected to generate 0.03 times more return on investment than AMC Entertainment. However, Vanguard California Intermediate Term is 39.68 times less risky than AMC Entertainment. It trades about -0.28 of its potential returns per unit of risk. AMC Entertainment Holdings is currently generating about -0.25 per unit of risk. If you would invest 1,138 in Vanguard California Intermediate Term on January 20, 2024 and sell it today you would lose (10.00) from holding Vanguard California Intermediate Term or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard California Intermedia vs. AMC Entertainment Holdings
Performance |
| Timeline |
| Vanguard California |
| AMC Entertainment |
Vanguard California and AMC Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard California and AMC Entertainment
The main advantage of trading using opposite Vanguard California and AMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard California position performs unexpectedly, AMC Entertainment 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 AMC Entertainment will offset losses from the drop in AMC Entertainment's long position.The idea behind Vanguard California Intermediate Term and AMC Entertainment Holdings 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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