Correlation Between Vanguard Target and American Funds
Can any of the company-specific risk be diversified away by investing in both Vanguard Target 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 Target 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 Target Retirement and American Funds 2045, you can compare the effects of market volatilities on Vanguard Target 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 Target with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and American Funds.
Diversification Opportunities for Vanguard Target and American Funds
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and American Funds 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2045 and Vanguard Target 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 Target Retirement 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 2045 has no effect on the direction of Vanguard Target i.e., Vanguard Target and American Funds go up and down completely randomly.
Pair Corralation between Vanguard Target and American Funds
Assuming the 90 days horizon Vanguard Target Retirement is expected to generate 0.97 times more return on investment than American Funds. However, Vanguard Target Retirement is 1.03 times less risky than American Funds. It trades about 0.06 of its potential returns per unit of risk. American Funds 2045 is currently generating about 0.01 per unit of risk. If you would invest 3,034 in Vanguard Target Retirement on November 27, 2024 and sell it today you would earn a total of 18.00 from holding Vanguard Target Retirement or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Target Retirement vs. American Funds 2045
Performance |
| Timeline |
| Vanguard Target Reti |
| American Funds 2045 |
Vanguard Target and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Target and American Funds
The main advantage of trading using opposite Vanguard Target and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target 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 Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement | Vanguard Target vs. Vanguard Target Retirement |
| American Funds vs. Ambrus Core Bond | American Funds vs. Intermediate Bond Fund | American Funds vs. Goldman Sachs Bond | American Funds vs. Intermediate Term Bond 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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