Correlation Between American Beacon and Vanguard Information
Can any of the company-specific risk be diversified away by investing in both American Beacon and Vanguard Information 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 Beacon and Vanguard Information into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Shapiro and Vanguard Information Technology, you can compare the effects of market volatilities on American Beacon and Vanguard Information 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 Beacon with a short position of Vanguard Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Vanguard Information.
Diversification Opportunities for American Beacon and Vanguard Information
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Vanguard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Shapiro and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information and American Beacon 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 Beacon Shapiro are associated (or correlated) with Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of American Beacon i.e., American Beacon and Vanguard Information go up and down completely randomly.
Pair Corralation between American Beacon and Vanguard Information
Assuming the 90 days horizon American Beacon Shapiro is expected to under-perform the Vanguard Information. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Beacon Shapiro is 1.63 times less risky than Vanguard Information. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Vanguard Information Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 31,889 in Vanguard Information Technology on September 13, 2024 and sell it today you would earn a total of 887.00 from holding Vanguard Information Technology or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Shapiro vs. Vanguard Information Technolog
Performance |
| Timeline |
| American Beacon Shapiro |
| Vanguard Information |
American Beacon and Vanguard Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Vanguard Information
The main advantage of trading using opposite American Beacon and Vanguard Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Vanguard Information 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 Information will offset losses from the drop in Vanguard Information's long position.| American Beacon vs. Nasdaq 100 Index Fund | American Beacon vs. Qs Growth Fund | American Beacon vs. L Abbett Fundamental | American Beacon vs. T Rowe Price |
| Vanguard Information vs. Vanguard Health Care | Vanguard Information vs. Vanguard Financials Index | Vanguard Information vs. Vanguard Sumer Discretionary | Vanguard Information vs. Vanguard Utilities 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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