Correlation Between Vanguard Small and American Beacon
Can any of the company-specific risk be diversified away by investing in both Vanguard Small 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 Small 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 Small Cap Value and American Beacon Shapiro, you can compare the effects of market volatilities on Vanguard Small 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 Small with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and American Beacon.
Diversification Opportunities for Vanguard Small and American Beacon
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and American is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and American Beacon Shapiro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Shapiro and Vanguard Small 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 Small Cap Value 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 Shapiro has no effect on the direction of Vanguard Small i.e., Vanguard Small and American Beacon go up and down completely randomly.
Pair Corralation between Vanguard Small and American Beacon
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 0.95 times more return on investment than American Beacon. However, Vanguard Small Cap Value is 1.05 times less risky than American Beacon. It trades about 0.09 of its potential returns per unit of risk. American Beacon Shapiro is currently generating about 0.04 per unit of risk. If you would invest 4,483 in Vanguard Small Cap Value on September 4, 2024 and sell it today you would earn a total of 703.00 from holding Vanguard Small Cap Value or generate 15.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.4% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. American Beacon Shapiro
Performance |
| Timeline |
| Vanguard Small Cap |
| American Beacon Shapiro |
Vanguard Small and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and American Beacon
The main advantage of trading using opposite Vanguard Small and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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 Small vs. Ab Global Real | Vanguard Small vs. Legg Mason Global | Vanguard Small vs. Ab Global Real | Vanguard Small vs. Barings Global Floating |
| American Beacon vs. T Rowe Price | American Beacon vs. T Rowe Price | American Beacon vs. T Rowe Price | American Beacon vs. Transamerica Asset Allocation |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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