Correlation Between Aama Equity and Vanguard 500
Can any of the company-specific risk be diversified away by investing in both Aama Equity and Vanguard 500 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 Aama Equity and Vanguard 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aama Equity Fund and Vanguard 500 Index, you can compare the effects of market volatilities on Aama Equity and Vanguard 500 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 Aama Equity with a short position of Vanguard 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aama Equity and Vanguard 500.
Diversification Opportunities for Aama Equity and Vanguard 500
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Aama and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Aama Equity Fund and Vanguard 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 500 Index and Aama Equity 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 Aama Equity Fund are associated (or correlated) with Vanguard 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard 500 Index has no effect on the direction of Aama Equity i.e., Aama Equity and Vanguard 500 go up and down completely randomly.
Pair Corralation between Aama Equity and Vanguard 500
Assuming the 90 days horizon Aama Equity Fund is expected to generate 0.72 times more return on investment than Vanguard 500. However, Aama Equity Fund is 1.38 times less risky than Vanguard 500. It trades about -0.16 of its potential returns per unit of risk. Vanguard 500 Index is currently generating about -0.17 per unit of risk. If you would invest 1,806 in Aama Equity Fund on January 25, 2024 and sell it today you would lose (35.00) from holding Aama Equity Fund or give up 1.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aama Equity Fund vs. Vanguard 500 Index
Performance |
| Timeline |
| Aama Equity Fund |
| Vanguard 500 Index |
Aama Equity and Vanguard 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aama Equity and Vanguard 500
The main advantage of trading using opposite Aama Equity and Vanguard 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aama Equity position performs unexpectedly, Vanguard 500 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 Vanguard 500 will offset losses from the drop in Vanguard 500's long position.| Aama Equity vs. Recurrent Mlp Infrastructure | Aama Equity vs. Invesco Floating Rate | Aama Equity vs. Vanguard Precious Metals | Aama Equity vs. Nuveen California Amt |
| Vanguard 500 vs. Vanguard Mid Cap Index | Vanguard 500 vs. Vanguard Small Cap Index | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Total International |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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