Correlation Between Vanguard Dividend and Amana Participation

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

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

Diversification Opportunities for Vanguard Dividend and Amana Participation

0.62

Correlation Coefficient

Vanguard Dividend  Amana Participation

Poor diversification

The 3 months correlation between Vanguard and Amana is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Growth and Amana Participation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Participation and Vanguard Dividend 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 Dividend Growth are associated (or correlated) with Amana Participation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Participation has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and Amana Participation go up and down completely randomly.

Pair Corralation between Vanguard Dividend and Amana Participation

Assuming the 90 days horizon Vanguard Dividend Growth is expected to generate 4.69 times more return on investment than Amana Participation. However, Vanguard Dividend is 4.69 times more volatile than Amana Participation Fund. It trades about 0.06 of its potential returns per unit of risk. Amana Participation Fund is currently generating about 0.1 per unit of risk. If you would invest  3,801  in Vanguard Dividend Growth on February 16, 2024 and sell it today you would earn a total of  70.00  from holding Vanguard Dividend Growth or generate 1.84% return on investment over 90 days.

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

Vanguard Dividend Growth  vs.  Amana Participation Fund

Vanguard Dividend Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Dividend Growth are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Dividend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amana Participation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Participation Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Amana Participation 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 Dividend and Amana Participation

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

The idea behind Vanguard Dividend Growth and Amana Participation 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.