Correlation Between American Balanced and Vanguard Managed

Can any of the company-specific risk be diversified away by investing in both American Balanced and Vanguard Managed 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 Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Balanced Fund and Vanguard Managed Payout, you can compare the effects of market volatilities on American Balanced and Vanguard Managed 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 Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Vanguard Managed.

Diversification Opportunities for American Balanced and Vanguard Managed

-0.37

Correlation Coefficient

American Balanced  Vanguard Managed

Very good diversification

The 3 months correlation between American and Vanguard is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Vanguard Managed Payout in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Managed Payout 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 Fund are associated (or correlated) with Vanguard Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Managed Payout has no effect on the direction of American Balanced i.e., American Balanced and Vanguard Managed go up and down completely randomly.

Pair Corralation between American Balanced and Vanguard Managed

If you would invest  3,610  in American Balanced Fund on September 16, 2024 and sell it today you would earn a total of  105.00  from holding American Balanced Fund or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

American Balanced Fund  vs.  Vanguard Managed Payout

American Balanced

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Balanced Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Managed Payout

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Managed Payout has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Vanguard Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Balanced and Vanguard Managed

The main advantage of trading using opposite American Balanced and Vanguard Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Vanguard Managed 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 Managed will offset losses from the drop in Vanguard Managed's long position.

The idea behind American Balanced Fund and Vanguard Managed Payout pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.