Correlation Between American Century and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both American Century and Vanguard Intermediate 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 Century and Vanguard Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century ETF and Vanguard Intermediate Term Corporate, you can compare the effects of market volatilities on American Century and Vanguard Intermediate 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 Century with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Vanguard Intermediate.
Diversification Opportunities for American Century and Vanguard Intermediate
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Century ETF and Vanguard Intermediate Term Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and American Century 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 Century ETF are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of American Century i.e., American Century and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between American Century and Vanguard Intermediate
Given the investment horizon of 90 days American Century is expected to generate 1.36 times less return on investment than Vanguard Intermediate. But when comparing it to its historical volatility, American Century ETF is 2.58 times less risky than Vanguard Intermediate. It trades about 0.11 of its potential returns per unit of risk. Vanguard Intermediate Term Corporate is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,289 in Vanguard Intermediate Term Corporate on September 2, 2024 and sell it today you would earn a total of 928.00 from holding Vanguard Intermediate Term Corporate or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century ETF vs. Vanguard Intermediate Term Cor
Performance |
| Timeline |
| American Century ETF |
| Vanguard Intermediate |
American Century and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Vanguard Intermediate
The main advantage of trading using opposite American Century and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Vanguard Intermediate 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 Intermediate will offset losses from the drop in Vanguard Intermediate's long position.| American Century vs. Avantis Core Fixed | American Century vs. Avantis Core Municipal | American Century vs. Avantis Emerging Markets | American Century vs. Avantis International Equity |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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