Correlation Between Blue Chip and American Funds

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Can any of the company-specific risk be diversified away by investing in both Blue Chip 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 Blue Chip and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Chip 35 and American Funds Fundamental, you can compare the effects of market volatilities on Blue Chip 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 Blue Chip with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Chip and American Funds.

Diversification Opportunities for Blue Chip and American Funds

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Blue and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BLUE CHIP 35 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 Blue Chip 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 Blue Chip 35 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 Blue Chip i.e., Blue Chip and American Funds go up and down completely randomly.

Pair Corralation between Blue Chip and American Funds

If you would invest  7,584  in American Funds Fundamental on December 30, 2023 and sell it today you would earn a total of  363.00  from holding American Funds Fundamental or generate 4.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

BLUE CHIP 35  vs.  AMERICAN FUNDS FUNDAMENTAL

 Performance 
       Timeline  
Blue Chip 35 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Blue Chip 35 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Blue Chip is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
American Funds Funda 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Fundamental are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Blue Chip and American Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Blue Chip and American Funds

The main advantage of trading using opposite Blue Chip and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Chip 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.
The idea behind Blue Chip 35 and American Funds Fundamental 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.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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