Correlation Between Vanguard Institutional and Amg Frontier

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

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

Diversification Opportunities for Vanguard Institutional and Amg Frontier

0.67

Correlation Coefficient

Vanguard Institutional  Amg Frontier

Poor diversification

The 3 months correlation between Vanguard and Amg is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Institutional Total and Amg Frontier Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Frontier Small and Vanguard Institutional 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 Institutional Total are associated (or correlated) with Amg Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Frontier Small has no effect on the direction of Vanguard Institutional i.e., Vanguard Institutional and Amg Frontier go up and down completely randomly.

Pair Corralation between Vanguard Institutional and Amg Frontier

Assuming the 90 days horizon Vanguard Institutional Total is expected to generate 0.45 times more return on investment than Amg Frontier. However, Vanguard Institutional Total is 2.23 times less risky than Amg Frontier. It trades about 0.08 of its potential returns per unit of risk. Amg Frontier Small is currently generating about -0.06 per unit of risk. If you would invest  9,770  in Vanguard Institutional Total on September 24, 2024 and sell it today you would earn a total of  390.00  from holding Vanguard Institutional Total or generate 3.99% return on investment over 90 days.

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

Vanguard Institutional Total  vs.  Amg Frontier Small

Vanguard Institutional

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Institutional Total are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Institutional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amg Frontier Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amg Frontier Small 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.

Pair Trading with Vanguard Institutional and Amg Frontier

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

The idea behind Vanguard Institutional Total and Amg Frontier Small 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.