Correlation Between Vanguard World and American International
Can any of the company-specific risk be diversified away by investing in both Vanguard World and American International 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 World and American International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard World and American International Group, you can compare the effects of market volatilities on Vanguard World and American International 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 World with a short position of American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and American International.
Diversification Opportunities for Vanguard World and American International
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and American is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International and Vanguard World 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 World are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Vanguard World i.e., Vanguard World and American International go up and down completely randomly.
Pair Corralation between Vanguard World and American International
Assuming the 90 days trading horizon Vanguard World is expected to generate 1.04 times less return on investment than American International. In addition to that, Vanguard World is 1.14 times more volatile than American International Group. It trades about 0.11 of its total potential returns per unit of risk. American International Group is currently generating about 0.13 per unit of volatility. If you would invest 112,577 in American International Group on September 15, 2024 and sell it today you would earn a total of 38,773 from holding American International Group or generate 34.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard World vs. American International Group
Performance |
| Timeline |
| Vanguard World |
| American International |
Vanguard World and American International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard World and American International
The main advantage of trading using opposite Vanguard World and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World position performs unexpectedly, American International 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 International will offset losses from the drop in American International's long position.| Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard STAR Funds | Vanguard World vs. SPDR SP 500 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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