Correlation Between American Funds and Vanguard Gnma
Can any of the company-specific risk be diversified away by investing in both American Funds and Vanguard Gnma 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 Gnma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Government and Vanguard Gnma Fund, you can compare the effects of market volatilities on American Funds and Vanguard Gnma 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 Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Vanguard Gnma.
Diversification Opportunities for American Funds and Vanguard Gnma
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 Government and Vanguard Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Gnma 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 Government are associated (or correlated) with Vanguard Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Gnma has no effect on the direction of American Funds i.e., American Funds and Vanguard Gnma go up and down completely randomly.
Pair Corralation between American Funds and Vanguard Gnma
Assuming the 90 days horizon American Funds Government is expected to under-perform the Vanguard Gnma. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Government is 1.1 times less risky than Vanguard Gnma. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Vanguard Gnma Fund is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 918.00 in Vanguard Gnma Fund on August 27, 2024 and sell it today you would earn a total of 0.00 from holding Vanguard Gnma Fund or generate 0.0% 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 Government vs. Vanguard Gnma Fund
Performance |
| Timeline |
| American Funds Government |
| Vanguard Gnma |
American Funds and Vanguard Gnma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Vanguard Gnma
The main advantage of trading using opposite American Funds and Vanguard Gnma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Vanguard Gnma 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 Gnma will offset losses from the drop in Vanguard Gnma's long position.| American Funds vs. Touchstone Large Cap | American Funds vs. Aqr Large Cap | American Funds vs. Massmutual Select T | American Funds vs. Siit Large Cap |
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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