Correlation Between Vanguard Total and American Customer

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

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

Diversification Opportunities for Vanguard Total and American Customer

0.86

Correlation Coefficient

Vanguard Total  American Customer

Very poor diversification

The 3 months correlation between Vanguard and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and American Customer Satisfaction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Customer and Vanguard Total 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 Total Stock are associated (or correlated) with American Customer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Customer has no effect on the direction of Vanguard Total i.e., Vanguard Total and American Customer go up and down completely randomly.

Pair Corralation between Vanguard Total and American Customer

Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the American Customer. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Stock is 1.07 times less risky than American Customer. The etf trades about -0.07 of its potential returns per unit of risk. The American Customer Satisfaction is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  6,169  in American Customer Satisfaction on December 27, 2024 and sell it today you would lose (132.00) from holding American Customer Satisfaction or give up 2.14% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  American Customer Satisfaction

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

American Customer

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Customer Satisfaction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, American Customer is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Total and American Customer

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

The idea behind Vanguard Total Stock and American Customer Satisfaction 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.