Correlation Between American Funds and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both American Funds and Vanguard FTSE 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 Funds and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Vanguard FTSE Canada, you can compare the effects of market volatilities on American Funds and Vanguard FTSE 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 Funds with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Vanguard FTSE.
Diversification Opportunities for American Funds and Vanguard FTSE
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Vanguard is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Vanguard FTSE Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canada and American Funds 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 Funds Fundamental are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Canada has no effect on the direction of American Funds i.e., American Funds and Vanguard FTSE go up and down completely randomly.
Pair Corralation between American Funds and Vanguard FTSE
Assuming the 90 days horizon American Funds Fundamental is expected to generate 1.58 times more return on investment than Vanguard FTSE. However, American Funds is 1.58 times more volatile than Vanguard FTSE Canada. It trades about 0.2 of its potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.26 per unit of risk. If you would invest 8,096 in American Funds Fundamental on November 3, 2024 and sell it today you would earn a total of 322.00 from holding American Funds Fundamental or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
American Funds Fundamental vs. Vanguard FTSE Canada
Performance |
| Timeline |
| American Funds Funda |
| Vanguard FTSE Canada |
American Funds and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Vanguard FTSE
The main advantage of trading using opposite American Funds and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE's long position.| American Funds vs. World Energy Fund | American Funds vs. Energy Services Fund | American Funds vs. Alpsalerian Energy Infrastructure | American Funds vs. Icon Natural Resources |
| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard Canadian Aggregate |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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