Correlation Between Vanguard Growth and American High-income
Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and American High-income 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 Growth and American High-income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Growth Index and American High Income Municipal, you can compare the effects of market volatilities on Vanguard Growth and American High-income 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 Growth with a short position of American High-income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and American High-income.
Diversification Opportunities for Vanguard Growth and American High-income
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and American is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and American High Income Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High Income and Vanguard Growth 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 Growth Index are associated (or correlated) with American High-income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Income has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and American High-income go up and down completely randomly.
Pair Corralation between Vanguard Growth and American High-income
Assuming the 90 days horizon Vanguard Growth Index is expected to generate 2.77 times more return on investment than American High-income. However, Vanguard Growth is 2.77 times more volatile than American High Income Municipal. It trades about 0.3 of its potential returns per unit of risk. American High Income Municipal is currently generating about 0.2 per unit of risk. If you would invest 19,869 in Vanguard Growth Index on September 2, 2024 and sell it today you would earn a total of 1,182 from holding Vanguard Growth Index or generate 5.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Growth Index vs. American High Income Municipal
Performance |
| Timeline |
| Vanguard Growth Index |
| American High Income |
Vanguard Growth and American High-income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Growth and American High-income
The main advantage of trading using opposite Vanguard Growth and American High-income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, American High-income 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 High-income will offset losses from the drop in American High-income's long position.| Vanguard Growth vs. Vanguard International Growth | Vanguard Growth vs. Vanguard Explorer Fund | Vanguard Growth vs. Vanguard Windsor Ii | Vanguard Growth vs. Vanguard Growth Fund |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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