Correlation Between Vanguard International and American Funds
Can any of the company-specific risk be diversified away by investing in both Vanguard International 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 International 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 International Growth and American Funds Amcap, you can compare the effects of market volatilities on Vanguard International 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 International with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard International and American Funds.
Diversification Opportunities for Vanguard International and American Funds
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International Growth and American Funds Amcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Amcap and Vanguard International 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 International Growth 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 Amcap has no effect on the direction of Vanguard International i.e., Vanguard International and American Funds go up and down completely randomly.
Pair Corralation between Vanguard International and American Funds
Assuming the 90 days horizon Vanguard International is expected to generate 1.79 times less return on investment than American Funds. In addition to that, Vanguard International is 1.19 times more volatile than American Funds Amcap. It trades about 0.04 of its total potential returns per unit of risk. American Funds Amcap is currently generating about 0.09 per unit of volatility. If you would invest 3,119 in American Funds Amcap on September 4, 2024 and sell it today you would earn a total of 1,505 from holding American Funds Amcap or generate 48.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard International Growth vs. American Funds Amcap
Performance |
| Timeline |
| Vanguard International |
| American Funds Amcap |
Vanguard International and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard International and American Funds
The main advantage of trading using opposite Vanguard International and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard International 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 International vs. Vanguard Explorer Fund | Vanguard International vs. Vanguard Windsor Ii | Vanguard International vs. Vanguard Growth Fund | Vanguard International vs. Vanguard Wellington Fund |
| American Funds vs. Prudential Jennison Financial | American Funds vs. Icon Financial Fund | American Funds vs. Royce Global Financial | American Funds vs. Vanguard Financials Index |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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