Correlation Between Vanguard and American Customer
Can any of the company-specific risk be diversified away by investing in both Vanguard and American Customer 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 and American Customer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and American Customer Satisfaction, you can compare the effects of market volatilities on Vanguard and American Customer 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 with a short position of American Customer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and American Customer.
Diversification Opportunities for Vanguard and American Customer
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and American Customer Satisfaction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Customer and Vanguard 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 SP 500 are associated (or correlated) with American Customer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Customer has no effect on the direction of Vanguard i.e., Vanguard and American Customer go up and down completely randomly.
Pair Corralation between Vanguard and American Customer
Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 1.16 times more return on investment than American Customer. However, Vanguard is 1.16 times more volatile than American Customer Satisfaction. It trades about 0.13 of its potential returns per unit of risk. American Customer Satisfaction is currently generating about 0.07 per unit of risk. If you would invest 53,722 in Vanguard SP 500 on October 20, 2024 and sell it today you would earn a total of 1,224 from holding Vanguard SP 500 or generate 2.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. American Customer Satisfaction
Performance |
| Timeline |
| Vanguard SP 500 |
| American Customer |
Vanguard and American Customer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and American Customer
The main advantage of trading using opposite Vanguard and American Customer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, American Customer 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 Customer will offset losses from the drop in American Customer's long position.| Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
| American Customer vs. Vanguard Total Stock | American Customer vs. SPDR SP 500 | American Customer vs. iShares Core SP | American Customer vs. Vanguard Dividend Appreciation |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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