Correlation Between American Funds and Vanguard Inflation-protec
Can any of the company-specific risk be diversified away by investing in both American Funds and Vanguard Inflation-protec 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 Inflation-protec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Inflation and Vanguard Inflation Protected Securities, you can compare the effects of market volatilities on American Funds and Vanguard Inflation-protec 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 Inflation-protec. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Vanguard Inflation-protec.
Diversification Opportunities for American Funds and Vanguard Inflation-protec
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Vanguard Inflation Protected S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Inflation-protec 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 Inflation are associated (or correlated) with Vanguard Inflation-protec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Inflation-protec has no effect on the direction of American Funds i.e., American Funds and Vanguard Inflation-protec go up and down completely randomly.
Pair Corralation between American Funds and Vanguard Inflation-protec
Assuming the 90 days horizon American Funds is expected to generate 3.11 times less return on investment than Vanguard Inflation-protec. But when comparing it to its historical volatility, American Funds Inflation is 1.12 times less risky than Vanguard Inflation-protec. It trades about 0.02 of its potential returns per unit of risk. Vanguard Inflation Protected Securities is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,313 in Vanguard Inflation Protected Securities on August 28, 2024 and sell it today you would earn a total of 8.00 from holding Vanguard Inflation Protected Securities or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Inflation vs. Vanguard Inflation Protected S
Performance |
| Timeline |
| American Funds Inflation |
| Vanguard Inflation-protec |
American Funds and Vanguard Inflation-protec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Vanguard Inflation-protec
The main advantage of trading using opposite American Funds and Vanguard Inflation-protec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Vanguard Inflation-protec 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 Inflation-protec will offset losses from the drop in Vanguard Inflation-protec's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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