Correlation Between Alpha Architect and Vanguard Dividend
Can any of the company-specific risk be diversified away by investing in both Alpha Architect and Vanguard Dividend 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 Alpha Architect and Vanguard Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha Architect Value and Vanguard Dividend Appreciation, you can compare the effects of market volatilities on Alpha Architect and Vanguard Dividend 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 Alpha Architect with a short position of Vanguard Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Architect and Vanguard Dividend.
Diversification Opportunities for Alpha Architect and Vanguard Dividend
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alpha and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect Value and Vanguard Dividend Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Dividend and Alpha Architect 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 Alpha Architect Value are associated (or correlated) with Vanguard Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Dividend has no effect on the direction of Alpha Architect i.e., Alpha Architect and Vanguard Dividend go up and down completely randomly.
Pair Corralation between Alpha Architect and Vanguard Dividend
Given the investment horizon of 90 days Alpha Architect Value is expected to under-perform the Vanguard Dividend. In addition to that, Alpha Architect is 4.82 times more volatile than Vanguard Dividend Appreciation. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Dividend Appreciation is currently generating about -0.3 per unit of volatility. If you would invest 18,200 in Vanguard Dividend Appreciation on January 20, 2024 and sell it today you would lose (786.00) from holding Vanguard Dividend Appreciation or give up 4.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Alpha Architect Value vs. Vanguard Dividend Appreciation
Performance |
| Timeline |
| Alpha Architect Value |
| Vanguard Dividend |
Alpha Architect and Vanguard Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha Architect and Vanguard Dividend
The main advantage of trading using opposite Alpha Architect and Vanguard Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect position performs unexpectedly, Vanguard Dividend 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 Dividend will offset losses from the drop in Vanguard Dividend's long position.| Alpha Architect vs. Alpha Architect Quantitative | Alpha Architect vs. Alpha Architect International | Alpha Architect vs. Alpha Architect International | Alpha Architect vs. Alpha Architect Quantitative |
| Vanguard Dividend vs. Dimensional Targeted Value | Vanguard Dividend vs. Dimensional World ex | Vanguard Dividend vs. Dimensional Small Cap |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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