Correlation Between Vanguard Total and American Balanced
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and American Balanced 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 Total and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and American Balanced Fund, you can compare the effects of market volatilities on Vanguard Total and American Balanced 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 Total with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and American Balanced.
Diversification Opportunities for Vanguard Total and American Balanced
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Vanguard and American is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Vanguard Total 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 Total Bond are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Vanguard Total i.e., Vanguard Total and American Balanced go up and down completely randomly.
Pair Corralation between Vanguard Total and American Balanced
Assuming the 90 days horizon Vanguard Total Bond is expected to generate 0.75 times more return on investment than American Balanced. However, Vanguard Total Bond is 1.33 times less risky than American Balanced. It trades about -0.21 of its potential returns per unit of risk. American Balanced Fund is currently generating about -0.16 per unit of risk. If you would invest 939.00 in Vanguard Total Bond on January 26, 2024 and sell it today you would lose (17.00) from holding Vanguard Total Bond or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. American Balanced Fund
Performance |
| Timeline |
| Vanguard Total Bond |
| American Balanced |
Vanguard Total and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and American Balanced
The main advantage of trading using opposite Vanguard Total and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard 500 Index |
| American Balanced vs. Fidelity Strategic Dividend | American Balanced vs. HUMANA INC | American Balanced vs. Aquagold International | American Balanced vs. Morningstar Unconstrained Allocation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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