Correlation Between Vanguard Total and American Funds

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Can any of the company-specific risk be diversified away by investing in both Vanguard Total and American Funds 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 Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total International and American Funds 2010, you can compare the effects of market volatilities on Vanguard Total and American Funds 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 Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and American Funds.

Diversification Opportunities for Vanguard Total and American Funds

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Vanguard and American is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding VANGUARD TOTAL INTERNATIONAL and AMERICAN FUNDS 2010 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2010 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 International are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2010 has no effect on the direction of Vanguard Total i.e., Vanguard Total and American Funds go up and down completely randomly.

Pair Corralation between Vanguard Total and American Funds

Assuming the 90 days horizon Vanguard Total International is expected to generate 2.18 times more return on investment than American Funds. However, Vanguard Total is 2.18 times more volatile than American Funds 2010. It trades about 0.22 of its potential returns per unit of risk. American Funds 2010 is currently generating about 0.38 per unit of risk. If you would invest  13,284  in Vanguard Total International on December 29, 2023 and sell it today you would earn a total of  361.00  from holding Vanguard Total International or generate 2.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

VANGUARD TOTAL INTERNATIONAL  vs.  AMERICAN FUNDS 2010

 Performance 
       Timeline  
Vanguard Total Inter 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
American Funds 2010 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2010 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total and American Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Total and American Funds

The main advantage of trading using opposite Vanguard Total and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, American Funds 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 Funds will offset losses from the drop in American Funds' long position.
The idea behind Vanguard Total International and American Funds 2010 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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