Correlation Between Vanguard Value and American Century

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

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

Diversification Opportunities for Vanguard Value and American Century

0.93

Correlation Coefficient

Vanguard Value  American Century

Almost no diversification

The 3 months correlation between Vanguard and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and American Century STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century STOXX and Vanguard Value 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 Value Index are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century STOXX has no effect on the direction of Vanguard Value i.e., Vanguard Value and American Century go up and down completely randomly.

Pair Corralation between Vanguard Value and American Century

Considering the 90-day investment horizon Vanguard Value is expected to generate 2.15 times less return on investment than American Century. In addition to that, Vanguard Value is 1.01 times more volatile than American Century STOXX. It trades about 0.06 of its total potential returns per unit of risk. American Century STOXX is currently generating about 0.12 per unit of volatility. If you would invest  6,044  in American Century STOXX on September 18, 2024 and sell it today you would earn a total of  287.00  from holding American Century STOXX or generate 4.75% return on investment over 90 days.

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

Vanguard Value Index  vs.  American Century STOXX

Vanguard Value Index

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

American Century STOXX

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century STOXX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, American Century is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Value and American Century

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

The idea behind Vanguard Value Index and American Century STOXX 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..