Correlation Between American Balanced and Vanguard Lifestrategy
Can any of the company-specific risk be diversified away by investing in both American Balanced and Vanguard Lifestrategy 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 American Balanced and Vanguard Lifestrategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Vanguard Lifestrategy Servative, you can compare the effects of market volatilities on American Balanced and Vanguard Lifestrategy 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 American Balanced with a short position of Vanguard Lifestrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Vanguard Lifestrategy.
Diversification Opportunities for American Balanced and Vanguard Lifestrategy
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Vanguard Lifestrategy Servativ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Lifestrategy and American Balanced 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 American Balanced are associated (or correlated) with Vanguard Lifestrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Lifestrategy has no effect on the direction of American Balanced i.e., American Balanced and Vanguard Lifestrategy go up and down completely randomly.
Pair Corralation between American Balanced and Vanguard Lifestrategy
Assuming the 90 days horizon American Balanced is expected to generate 1.38 times more return on investment than Vanguard Lifestrategy. However, American Balanced is 1.38 times more volatile than Vanguard Lifestrategy Servative. It trades about -0.18 of its potential returns per unit of risk. Vanguard Lifestrategy Servative is currently generating about -0.27 per unit of risk. If you would invest 3,385 in American Balanced on January 28, 2024 and sell it today you would lose (73.00) from holding American Balanced or give up 2.16% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Balanced vs. Vanguard Lifestrategy Servativ
Performance |
Timeline |
American Balanced |
Vanguard Lifestrategy |
American Balanced and Vanguard Lifestrategy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Balanced and Vanguard Lifestrategy
The main advantage of trading using opposite American Balanced and Vanguard Lifestrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Vanguard Lifestrategy 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 Lifestrategy will offset losses from the drop in Vanguard Lifestrategy's long position.American Balanced vs. Income Fund Of | American Balanced vs. New World Fund | American Balanced vs. American Mutual Fund | American Balanced vs. American Mutual 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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