Correlation Between Aama Equity and American Funds
Can any of the company-specific risk be diversified away by investing in both Aama Equity and American Funds 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 Aama Equity and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aama Equity Fund and American Funds Fundamental, you can compare the effects of market volatilities on Aama Equity and American Funds 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 Aama Equity with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aama Equity and American Funds.
Diversification Opportunities for Aama Equity and American Funds
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Aama and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Aama Equity Fund and American Funds Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Funda and Aama Equity 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 Aama Equity Fund are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Funda has no effect on the direction of Aama Equity i.e., Aama Equity and American Funds go up and down completely randomly.
Pair Corralation between Aama Equity and American Funds
Assuming the 90 days horizon Aama Equity is expected to generate 1.67 times less return on investment than American Funds. But when comparing it to its historical volatility, Aama Equity Fund is 1.12 times less risky than American Funds. It trades about 0.05 of its potential returns per unit of risk. American Funds Fundamental is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,713 in American Funds Fundamental on January 19, 2024 and sell it today you would earn a total of 1,935 from holding American Funds Fundamental or generate 33.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aama Equity Fund vs. American Funds Fundamental
Performance |
| Timeline |
| Aama Equity Fund |
| American Funds Funda |
Aama Equity and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aama Equity and American Funds
The main advantage of trading using opposite Aama Equity and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aama Equity position performs unexpectedly, American Funds 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 Funds will offset losses from the drop in American Funds' long position.| Aama Equity vs. Vanguard Total Stock | Aama Equity vs. Vanguard 500 Index | Aama Equity vs. Vanguard Institutional Index |
| American Funds vs. Vanguard Total Stock | American Funds vs. Vanguard 500 Index | American Funds vs. Vanguard Institutional 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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