Correlation Between American Century and Vanguard ESG

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

By analyzing existing cross correlation between American Century STOXX and Vanguard ESG Corporate, you can compare the effects of market volatilities on American Century and Vanguard ESG 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 Century with a short position of Vanguard ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Vanguard ESG.

Diversification Opportunities for American Century and Vanguard ESG

0.72

Correlation Coefficient

American Century  Vanguard ESG

Poor diversification

The 3 months correlation between American and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Century STOXX and Vanguard ESG Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG Corporate and American Century 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 Century STOXX are associated (or correlated) with Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG Corporate has no effect on the direction of American Century i.e., American Century and Vanguard ESG go up and down completely randomly.

Pair Corralation between American Century and Vanguard ESG

Given the investment horizon of 90 days American Century STOXX is expected to generate 1.93 times more return on investment than Vanguard ESG. However, American Century is 1.93 times more volatile than Vanguard ESG Corporate. It trades about 0.01 of its potential returns per unit of risk. Vanguard ESG Corporate is currently generating about -0.04 per unit of risk. If you would invest  6,199  in American Century STOXX on October 20, 2024 and sell it today you would earn a total of  22.00  from holding American Century STOXX or generate 0.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

American Century STOXX  vs.  Vanguard ESG Corporate

American Century STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, American Century is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard ESG Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard ESG Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard ESG 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 Century and Vanguard ESG

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

The idea behind American Century STOXX and Vanguard ESG Corporate 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.