Correlation Between Alternative Credit and Vanguard 500
Can any of the company-specific risk be diversified away by investing in both Alternative Credit and Vanguard 500 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 Alternative Credit and Vanguard 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alternative Credit Income and Vanguard 500 Index, you can compare the effects of market volatilities on Alternative Credit and Vanguard 500 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 Alternative Credit with a short position of Vanguard 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Credit and Vanguard 500.
Diversification Opportunities for Alternative Credit and Vanguard 500
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alternative and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Credit Income and Vanguard 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 500 Index and Alternative Credit 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 Alternative Credit Income are associated (or correlated) with Vanguard 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard 500 Index has no effect on the direction of Alternative Credit i.e., Alternative Credit and Vanguard 500 go up and down completely randomly.
Pair Corralation between Alternative Credit and Vanguard 500
Assuming the 90 days horizon Alternative Credit is expected to generate 26.54 times less return on investment than Vanguard 500. But when comparing it to its historical volatility, Alternative Credit Income is 6.95 times less risky than Vanguard 500. It trades about 0.04 of its potential returns per unit of risk. Vanguard 500 Index is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 53,865 in Vanguard 500 Index on August 30, 2024 and sell it today you would earn a total of 1,487 from holding Vanguard 500 Index or generate 2.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alternative Credit Income vs. Vanguard 500 Index
Performance |
| Timeline |
| Alternative Credit Income |
| Vanguard 500 Index |
Alternative Credit and Vanguard 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alternative Credit and Vanguard 500
The main advantage of trading using opposite Alternative Credit and Vanguard 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Credit position performs unexpectedly, Vanguard 500 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 500 will offset losses from the drop in Vanguard 500's long position.| Alternative Credit vs. Aig Government Money | Alternative Credit vs. Blackrock Government Bond | Alternative Credit vs. Dws Government Money | Alternative Credit vs. Franklin Adjustable Government |
| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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