Correlation Between American Beacon and Vanguard Explorer
Can any of the company-specific risk be diversified away by investing in both American Beacon and Vanguard Explorer 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 American Beacon and Vanguard Explorer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Large and Vanguard Explorer Fund, you can compare the effects of market volatilities on American Beacon and Vanguard Explorer 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 American Beacon with a short position of Vanguard Explorer. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Vanguard Explorer.
Diversification Opportunities for American Beacon and Vanguard Explorer
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Vanguard is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Large and Vanguard Explorer Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Explorer and American Beacon 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 American Beacon Large are associated (or correlated) with Vanguard Explorer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Explorer has no effect on the direction of American Beacon i.e., American Beacon and Vanguard Explorer go up and down completely randomly.
Pair Corralation between American Beacon and Vanguard Explorer
Assuming the 90 days horizon American Beacon Large is expected to generate 0.66 times more return on investment than Vanguard Explorer. However, American Beacon Large is 1.52 times less risky than Vanguard Explorer. It trades about -0.05 of its potential returns per unit of risk. Vanguard Explorer Fund is currently generating about -0.11 per unit of risk. If you would invest 2,730 in American Beacon Large on December 26, 2024 and sell it today you would lose (33.00) from holding American Beacon Large or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Large vs. Vanguard Explorer Fund
Performance |
| Timeline |
| American Beacon Large |
| Vanguard Explorer |
American Beacon and Vanguard Explorer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Vanguard Explorer
The main advantage of trading using opposite American Beacon and Vanguard Explorer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Vanguard Explorer 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 Explorer will offset losses from the drop in Vanguard Explorer's long position.| American Beacon vs. T Rowe Price | American Beacon vs. Invesco Real Estate | American Beacon vs. Global Real Estate | American Beacon vs. Nexpoint Real Estate |
| Vanguard Explorer vs. Vanguard International Growth | Vanguard Explorer vs. Vanguard Windsor Ii | Vanguard Explorer vs. Vanguard Primecap Fund | Vanguard Explorer vs. Vanguard Growth 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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