Correlation Between Vanguard Strategic and American Mutual
Can any of the company-specific risk be diversified away by investing in both Vanguard Strategic and American Mutual 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 Strategic and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Strategic Small Cap and American Mutual Fund, you can compare the effects of market volatilities on Vanguard Strategic and American Mutual 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 Strategic with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Strategic and American Mutual.
Diversification Opportunities for Vanguard Strategic and American Mutual
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Strategic Small Cap and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Vanguard Strategic 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 Strategic Small Cap are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Vanguard Strategic i.e., Vanguard Strategic and American Mutual go up and down completely randomly.
Pair Corralation between Vanguard Strategic and American Mutual
Assuming the 90 days horizon Vanguard Strategic Small Cap is expected to generate 2.04 times more return on investment than American Mutual. However, Vanguard Strategic is 2.04 times more volatile than American Mutual Fund. It trades about 0.07 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.09 per unit of risk. If you would invest 3,183 in Vanguard Strategic Small Cap on September 3, 2024 and sell it today you would earn a total of 1,517 from holding Vanguard Strategic Small Cap or generate 47.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Strategic Small Cap vs. American Mutual Fund
Performance |
| Timeline |
| Vanguard Strategic |
| American Mutual |
Vanguard Strategic and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Strategic and American Mutual
The main advantage of trading using opposite Vanguard Strategic and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Strategic position performs unexpectedly, American Mutual 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 Mutual will offset losses from the drop in American Mutual's long position.| Vanguard Strategic vs. Vanguard Explorer Value | Vanguard Strategic vs. Vanguard Strategic Equity | Vanguard Strategic vs. Vanguard Diversified Equity | Vanguard Strategic vs. Vanguard Mid Cap |
| American Mutual vs. Dodge Cox Stock | American Mutual vs. American Funds American | American Mutual vs. American Funds American | American Mutual vs. American Mutual Fund |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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