Correlation Between Selected American and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Selected American and Vanguard Total 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 Selected American and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Selected American Shares and Vanguard Total Stock, you can compare the effects of market volatilities on Selected American and Vanguard Total 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 Selected American with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selected American and Vanguard Total.
Diversification Opportunities for Selected American and Vanguard Total
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Selected and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Selected American Shares and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and Selected American 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 Selected American Shares are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Selected American i.e., Selected American and Vanguard Total go up and down completely randomly.
Pair Corralation between Selected American and Vanguard Total
Assuming the 90 days horizon Selected American is expected to generate 1.37 times less return on investment than Vanguard Total. In addition to that, Selected American is 1.25 times more volatile than Vanguard Total Stock. It trades about 0.08 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.13 per unit of volatility. If you would invest 14,030 in Vanguard Total Stock on September 12, 2024 and sell it today you would earn a total of 539.00 from holding Vanguard Total Stock or generate 3.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selected American Shares vs. Vanguard Total Stock
Performance |
| Timeline |
| Selected American Shares |
| Vanguard Total Stock |
Selected American and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selected American and Vanguard Total
The main advantage of trading using opposite Selected American and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selected American position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Selected American vs. Calamos Global Equity | Selected American vs. Huber Capital Equity | Selected American vs. Artisan Select Equity | Selected American vs. Balanced Fund Retail |
| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard 500 Index | Vanguard Total vs. Vanguard Reit 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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