Correlation Between Vanguard Health and Aama Equity

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

By analyzing existing cross correlation between Vanguard Health Care and Aama Equity Fund, you can compare the effects of market volatilities on Vanguard Health and Aama Equity 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 Health with a short position of Aama Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Aama Equity.

Diversification Opportunities for Vanguard Health and Aama Equity

-0.78

Correlation Coefficient

Vanguard Health  Aama Equity

Pay attention - limited upside

The 3 months correlation between Vanguard and Aama is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Aama Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aama Equity Fund and Vanguard Health 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 Health Care are associated (or correlated) with Aama Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aama Equity Fund has no effect on the direction of Vanguard Health i.e., Vanguard Health and Aama Equity go up and down completely randomly.

Pair Corralation between Vanguard Health and Aama Equity

Assuming the 90 days horizon Vanguard Health Care is expected to under-perform the Aama Equity. In addition to that, Vanguard Health is 1.29 times more volatile than Aama Equity Fund. It trades about -0.24 of its total potential returns per unit of risk. Aama Equity Fund is currently generating about 0.16 per unit of volatility. If you would invest  1,905  in Aama Equity Fund on September 18, 2024 and sell it today you would earn a total of  110.00  from holding Aama Equity Fund or generate 5.77% return on investment over 90 days.

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

Vanguard Health Care  vs.  Aama Equity Fund

Vanguard Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aama Equity Fund

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aama Equity Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Aama Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Health and Aama Equity

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

The idea behind Vanguard Health Care and Aama Equity Fund 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 Stocks Directory module to find actively traded stocks across global markets.