Correlation Between Vanguard 500 and American Beacon
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and American Beacon 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 Vanguard 500 and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and American Beacon Twentyfour, you can compare the effects of market volatilities on Vanguard 500 and American Beacon 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 Vanguard 500 with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and American Beacon.
Diversification Opportunities for Vanguard 500 and American Beacon
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and American Beacon Twentyfour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Twen and Vanguard 500 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 Vanguard 500 Index are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Twen has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and American Beacon go up and down completely randomly.
Pair Corralation between Vanguard 500 and American Beacon
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 8.18 times more return on investment than American Beacon. However, Vanguard 500 is 8.18 times more volatile than American Beacon Twentyfour. It trades about 0.15 of its potential returns per unit of risk. American Beacon Twentyfour is currently generating about 0.29 per unit of risk. If you would invest 41,467 in Vanguard 500 Index on September 15, 2024 and sell it today you would earn a total of 14,514 from holding Vanguard 500 Index or generate 35.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. American Beacon Twentyfour
Performance |
| Timeline |
| Vanguard 500 Index |
| American Beacon Twen |
Vanguard 500 and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and American Beacon
The main advantage of trading using opposite Vanguard 500 and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| Vanguard 500 vs. Vanguard Total International | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Reit Index |
| American Beacon vs. Cutler Equity | American Beacon vs. Ms Global Fixed | American Beacon vs. Us Strategic Equity | American Beacon vs. Balanced Fund Retail |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |