Correlation Between General American and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both General American and Vanguard Total 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 General American and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General American Investors and Vanguard Total International, you can compare the effects of market volatilities on General American and Vanguard Total 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 General American with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and Vanguard Total.
Diversification Opportunities for General American and Vanguard Total
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between General and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter and General American 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 General American Investors are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Inter has no effect on the direction of General American i.e., General American and Vanguard Total go up and down completely randomly.
Pair Corralation between General American and Vanguard Total
Assuming the 90 days horizon General American Investors is expected to generate 1.05 times more return on investment than Vanguard Total. However, General American is 1.05 times more volatile than Vanguard Total International. It trades about -0.09 of its potential returns per unit of risk. Vanguard Total International is currently generating about -0.1 per unit of risk. If you would invest 5,632 in General American Investors on January 25, 2024 and sell it today you would lose (78.00) from holding General American Investors or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
General American Investors vs. Vanguard Total International
Performance |
| Timeline |
| General American Inv |
| Vanguard Total Inter |
General American and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General American and Vanguard Total
The main advantage of trading using opposite General American and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General American position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| General American vs. Vanguard Total Stock | General American vs. Vanguard 500 Index | General American vs. Vanguard Total Stock | General American vs. Vanguard Total Stock |
| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Developed Markets | Vanguard Total vs. Vanguard Developed Markets | Vanguard Total vs. Fidelity International Index |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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