Correlation Between Global Opportunity and American Funds
Can any of the company-specific risk be diversified away by investing in both Global Opportunity 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 Global Opportunity and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Opportunity Portfolio and American Funds Global, you can compare the effects of market volatilities on Global Opportunity 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 Global Opportunity with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Opportunity and American Funds.
Diversification Opportunities for Global Opportunity and American Funds
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunity Portfolio and American Funds Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global and Global Opportunity 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 Global Opportunity Portfolio 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 Global has no effect on the direction of Global Opportunity i.e., Global Opportunity and American Funds go up and down completely randomly.
Pair Corralation between Global Opportunity and American Funds
Assuming the 90 days horizon Global Opportunity Portfolio is expected to generate 1.25 times more return on investment than American Funds. However, Global Opportunity is 1.25 times more volatile than American Funds Global. It trades about -0.12 of its potential returns per unit of risk. American Funds Global is currently generating about -0.17 per unit of risk. If you would invest 2,873 in Global Opportunity Portfolio on January 26, 2024 and sell it today you would lose (78.00) from holding Global Opportunity Portfolio or give up 2.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Opportunity Portfolio vs. American Funds Global
Performance |
| Timeline |
| Global Opportunity |
| American Funds Global |
Global Opportunity and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Opportunity and American Funds
The main advantage of trading using opposite Global Opportunity and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Opportunity 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.| Global Opportunity vs. Marsico 21st Century | Global Opportunity vs. Northern Small Cap | Global Opportunity vs. Aberdeen Select International | Global Opportunity vs. HUMANA INC |
| American Funds vs. Marsico 21st Century | American Funds vs. Northern Small Cap | American Funds vs. Aberdeen Select International | American Funds vs. HUMANA INC |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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