Correlation Between Vanguard Total and American Freedom

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and American Freedom 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 Freedom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Total Stock and American Freedom Government, you can compare the effects of market volatilities on Vanguard Total and American Freedom 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 Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and American Freedom.

Diversification Opportunities for Vanguard Total and American Freedom

0.0

Correlation Coefficient

Vanguard Total  American Freedom

Pay attention - limited upside

The 3 months correlation between Vanguard and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and American Freedom Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Freedom Gov 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 Stock are associated (or correlated) with American Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Freedom Gov has no effect on the direction of Vanguard Total i.e., Vanguard Total and American Freedom go up and down completely randomly.

Pair Corralation between Vanguard Total and American Freedom

If you would invest  12,352  in Vanguard Total Stock on March 4, 2024 and sell it today you would earn a total of  321.00  from holding Vanguard Total Stock or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vanguard Total Stock  vs.  American Freedom Government

Vanguard Total Stock

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 4 (%) 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 Freedom Gov

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Freedom Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Freedom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and American Freedom

The main advantage of trading using opposite Vanguard Total and American Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, American Freedom 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 Freedom will offset losses from the drop in American Freedom's long position.

The idea behind Vanguard Total Stock and American Freedom Government 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.