Correlation Between AMS Small and Vanguard LifeStrategy
Can any of the company-specific risk be diversified away by investing in both AMS Small and Vanguard LifeStrategy 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 AMS Small and Vanguard LifeStrategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMS Small Cap and Vanguard LifeStrategy 20, you can compare the effects of market volatilities on AMS Small and Vanguard LifeStrategy 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 AMS Small with a short position of Vanguard LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMS Small and Vanguard LifeStrategy.
Diversification Opportunities for AMS Small and Vanguard LifeStrategy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AMS and Vanguard is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and Vanguard LifeStrategy 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy and AMS Small 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 AMS Small Cap are associated (or correlated) with Vanguard LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of AMS Small i.e., AMS Small and Vanguard LifeStrategy go up and down completely randomly.
Pair Corralation between AMS Small and Vanguard LifeStrategy
Assuming the 90 days trading horizon AMS Small Cap is expected to under-perform the Vanguard LifeStrategy. In addition to that, AMS Small is 6.2 times more volatile than Vanguard LifeStrategy 20. It trades about -0.25 of its total potential returns per unit of risk. Vanguard LifeStrategy 20 is currently generating about 0.26 per unit of volatility. If you would invest 2,246 in Vanguard LifeStrategy 20 on August 29, 2024 and sell it today you would earn a total of 22.00 from holding Vanguard LifeStrategy 20 or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMS Small Cap vs. Vanguard LifeStrategy 20
Performance |
| Timeline |
AMS Small and Vanguard LifeStrategy Volatility Contrast
Predicted Return Density |
| Returns |
AMS Small Cap
Pair trading matchups for AMS Small
Vanguard LifeStrategy 20
Pair trading matchups for Vanguard LifeStrategy
Pair Trading with AMS Small and Vanguard LifeStrategy
The main advantage of trading using opposite AMS Small and Vanguard LifeStrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMS Small position performs unexpectedly, Vanguard LifeStrategy 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 LifeStrategy will offset losses from the drop in Vanguard LifeStrategy's long position.The idea behind AMS Small Cap and Vanguard LifeStrategy 20 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.| Vanguard LifeStrategy vs. Vanguard FTSE All World | Vanguard LifeStrategy vs. Vanguard FTSE Developed | Vanguard LifeStrategy vs. Vanguard FTSE All World | Vanguard LifeStrategy vs. Vanguard FTSE Developed |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |