Correlation Between American Funds and Global Alpha
Can any of the company-specific risk be diversified away by investing in both American Funds and Global Alpha 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 American Funds and Global Alpha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Global and The Global Alpha, you can compare the effects of market volatilities on American Funds and Global Alpha 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 American Funds with a short position of Global Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Global Alpha.
Diversification Opportunities for American Funds and Global Alpha
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Global is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Global and The Global Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Alpha and American Funds 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 American Funds Global are associated (or correlated) with Global Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Alpha has no effect on the direction of American Funds i.e., American Funds and Global Alpha go up and down completely randomly.
Pair Corralation between American Funds and Global Alpha
Assuming the 90 days horizon American Funds Global is expected to generate 0.79 times more return on investment than Global Alpha. However, American Funds Global is 1.27 times less risky than Global Alpha. It trades about 0.05 of its potential returns per unit of risk. The Global Alpha is currently generating about 0.02 per unit of risk. If you would invest 1,967 in American Funds Global on January 24, 2024 and sell it today you would earn a total of 127.00 from holding American Funds Global or generate 6.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Global vs. The Global Alpha
Performance |
| Timeline |
| American Funds Global |
| Global Alpha |
American Funds and Global Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Global Alpha
The main advantage of trading using opposite American Funds and Global Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Global Alpha 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 Global Alpha will offset losses from the drop in Global Alpha's long position.| American Funds vs. Columbia Capital Allocation | American Funds vs. Fidelity Capital Income | American Funds vs. Pace International Equity | American Funds vs. Fidelity 500 Index |
| Global Alpha vs. The Eafe Pure | Global Alpha vs. Baillie Gifford International | Global Alpha vs. Baillie Gifford China | Global Alpha vs. Baillie Gifford China |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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