Correlation Between Vanguard and American Mutual
Can any of the company-specific risk be diversified away by investing in both Vanguard and American Mutual 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 and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Sp 500 and American Mutual Fund, you can compare the effects of market volatilities on Vanguard and American Mutual 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 with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and American Mutual.
Diversification Opportunities for Vanguard and American Mutual
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Sp 500 and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Vanguard 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 Sp 500 are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Vanguard i.e., Vanguard and American Mutual go up and down completely randomly.
Pair Corralation between Vanguard and American Mutual
Assuming the 90 days horizon Vanguard Sp 500 is expected to generate 1.15 times more return on investment than American Mutual. However, Vanguard is 1.15 times more volatile than American Mutual Fund. It trades about 0.11 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.11 per unit of risk. If you would invest 36,484 in Vanguard Sp 500 on January 24, 2024 and sell it today you would earn a total of 1,621 from holding Vanguard Sp 500 or generate 4.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Sp 500 vs. American Mutual Fund
Performance |
Timeline |
Vanguard Sp 500 |
American Mutual |
Vanguard and American Mutual Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard and American Mutual
The main advantage of trading using opposite Vanguard and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, American Mutual 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 Mutual will offset losses from the drop in American Mutual's long position.Vanguard vs. Vanguard Wellington Fund | Vanguard vs. Vanguard Wellesley Income | Vanguard vs. Vanguard Mid Cap Index | Vanguard vs. Vanguard Health Care |
American Mutual vs. American Funds Fundamental | American Mutual vs. Amcap Fund Class | American Mutual vs. New Perspective Fund | American Mutual vs. American Balanced Fund |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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