Correlation Between Vanguard Large and American Century
Can any of the company-specific risk be diversified away by investing in both Vanguard Large and American Century 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 Large and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Large Cap Index and American Century ETF, you can compare the effects of market volatilities on Vanguard Large and American Century 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 Large with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and American Century.
Diversification Opportunities for Vanguard Large and American Century
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and American is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF and Vanguard Large 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 Large Cap Index are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of Vanguard Large i.e., Vanguard Large and American Century go up and down completely randomly.
Pair Corralation between Vanguard Large and American Century
Allowing for the 90-day total investment horizon Vanguard Large is expected to generate 1.17 times less return on investment than American Century. But when comparing it to its historical volatility, Vanguard Large Cap Index is 1.03 times less risky than American Century. It trades about 0.14 of its potential returns per unit of risk. American Century ETF is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,925 in American Century ETF on August 30, 2024 and sell it today you would earn a total of 2,083 from holding American Century ETF or generate 42.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 74.87% |
| Values | Daily Returns |
Vanguard Large Cap Index vs. American Century ETF
Performance |
| Timeline |
| Vanguard Large Cap |
| American Century ETF |
Vanguard Large and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Large and American Century
The main advantage of trading using opposite Vanguard Large and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large position performs unexpectedly, American Century 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 Century will offset losses from the drop in American Century's long position.| Vanguard Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
| American Century vs. FT Vest Equity | American Century vs. Northern Lights | American Century vs. Dimensional International High | American Century vs. First Trust Exchange Traded |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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