Correlation Between American Funds and Vaughan Nelson
Can any of the company-specific risk be diversified away by investing in both American Funds and Vaughan Nelson 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 Vaughan Nelson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Vaughan Nelson Value, you can compare the effects of market volatilities on American Funds and Vaughan Nelson 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 Vaughan Nelson. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Vaughan Nelson.
Diversification Opportunities for American Funds and Vaughan Nelson
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Vaughan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Vaughan Nelson Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaughan Nelson Value 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 Retirement are associated (or correlated) with Vaughan Nelson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaughan Nelson Value has no effect on the direction of American Funds i.e., American Funds and Vaughan Nelson go up and down completely randomly.
Pair Corralation between American Funds and Vaughan Nelson
Assuming the 90 days horizon American Funds is expected to generate 2.4 times less return on investment than Vaughan Nelson. But when comparing it to its historical volatility, American Funds Retirement is 2.32 times less risky than Vaughan Nelson. It trades about 0.1 of its potential returns per unit of risk. Vaughan Nelson Value is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,039 in Vaughan Nelson Value on August 31, 2024 and sell it today you would earn a total of 919.00 from holding Vaughan Nelson Value or generate 45.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Vaughan Nelson Value
Performance |
| Timeline |
| American Funds Retirement |
| Vaughan Nelson Value |
American Funds and Vaughan Nelson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Vaughan Nelson
The main advantage of trading using opposite American Funds and Vaughan Nelson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Vaughan Nelson 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 Vaughan Nelson will offset losses from the drop in Vaughan Nelson's long position.| American Funds vs. Baird Smallmid Cap | American Funds vs. Touchstone Small Cap | American Funds vs. Kinetics Small Cap | American Funds vs. Small Midcap Dividend Income |
| Vaughan Nelson vs. American Funds Retirement | Vaughan Nelson vs. Target Retirement 2040 | Vaughan Nelson vs. Tiaa Cref Lifestyle Moderate | Vaughan Nelson vs. Moderately Aggressive Balanced |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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