Correlation Between Vanguard Short and American Funds
Can any of the company-specific risk be diversified away by investing in both Vanguard Short and American Funds 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 Short and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Short Term Federal and American Funds New, you can compare the effects of market volatilities on Vanguard Short and American Funds 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 Short with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and American Funds.
Diversification Opportunities for Vanguard Short and American Funds
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and American is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Federal and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New and Vanguard Short 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 Short Term Federal are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds New has no effect on the direction of Vanguard Short i.e., Vanguard Short and American Funds go up and down completely randomly.
Pair Corralation between Vanguard Short and American Funds
Assuming the 90 days horizon Vanguard Short is expected to generate 2.99 times less return on investment than American Funds. But when comparing it to its historical volatility, Vanguard Short Term Federal is 3.9 times less risky than American Funds. It trades about 0.08 of its potential returns per unit of risk. American Funds New is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,590 in American Funds New on September 3, 2024 and sell it today you would earn a total of 1,496 from holding American Funds New or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Short Term Federal vs. American Funds New
Performance |
| Timeline |
| Vanguard Short Term |
| American Funds New |
Vanguard Short and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Short and American Funds
The main advantage of trading using opposite Vanguard Short and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short position performs unexpectedly, American Funds 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 Funds will offset losses from the drop in American Funds' long position.| Vanguard Short vs. Vanguard Short Term Treasury | Vanguard Short vs. Vanguard Intermediate Term Treasury | Vanguard Short vs. Vanguard Short Term Bond | Vanguard Short vs. Vanguard Long Term Treasury |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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