Correlation Between Vanguard Total and American Beacon
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Stock and American Beacon Small, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and American Beacon.
Diversification Opportunities for Vanguard Total and American Beacon
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and American is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small and Vanguard Total 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 Total Stock 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 Small has no effect on the direction of Vanguard Total i.e., Vanguard Total and American Beacon go up and down completely randomly.
Pair Corralation between Vanguard Total and American Beacon
Assuming the 90 days horizon Vanguard Total Stock is expected to generate 0.66 times more return on investment than American Beacon. However, Vanguard Total Stock is 1.52 times less risky than American Beacon. It trades about 0.11 of its potential returns per unit of risk. American Beacon Small is currently generating about 0.04 per unit of risk. If you would invest 9,442 in Vanguard Total Stock on August 26, 2024 and sell it today you would earn a total of 4,996 from holding Vanguard Total Stock or generate 52.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Vanguard Total Stock vs. American Beacon Small
Performance |
| Timeline |
| Vanguard Total Stock |
| American Beacon Small |
Vanguard Total and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and American Beacon
The main advantage of trading using opposite Vanguard Total and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard 500 Index | Vanguard Total vs. Vanguard Reit Index |
| American Beacon vs. Vanguard Total Stock | American Beacon vs. Vanguard 500 Index | American Beacon vs. Vanguard Total Stock | American Beacon vs. Vanguard Total Stock |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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