Correlation Between Annaly Capital and American Funds
Can any of the company-specific risk be diversified away by investing in both Annaly Capital 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 Annaly Capital and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Annaly Capital Management and American Funds Global, you can compare the effects of market volatilities on Annaly Capital 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 Annaly Capital with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and American Funds.
Diversification Opportunities for Annaly Capital and American Funds
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Annaly and American is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management 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 Annaly Capital 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 Annaly Capital Management 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 Annaly Capital i.e., Annaly Capital and American Funds go up and down completely randomly.
Pair Corralation between Annaly Capital and American Funds
Considering the 90-day investment horizon Annaly Capital Management is expected to under-perform the American Funds. In addition to that, Annaly Capital is 2.15 times more volatile than American Funds Global. It trades about -0.21 of its total potential returns per unit of risk. American Funds Global is currently generating about -0.29 per unit of volatility. If you would invest 2,207 in American Funds Global on January 20, 2024 and sell it today you would lose (90.00) from holding American Funds Global or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Annaly Capital Management vs. American Funds Global
Performance |
| Timeline |
| Annaly Capital Management |
| American Funds Global |
Annaly Capital and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Annaly Capital and American Funds
The main advantage of trading using opposite Annaly Capital and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital 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 Annaly Capital Management and American Funds Global 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.| American Funds vs. Columbia Capital Allocation | American Funds vs. State Street Institutional | American Funds vs. Blackrock Basic Value | American Funds vs. Europacific Growth Fund |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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