Correlation Between Investment and American Funds
Can any of the company-specific risk be diversified away by investing in both Investment 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 Investment and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Of America and American Funds Fundamental, you can compare the effects of market volatilities on Investment 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 Investment with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and American Funds.
Diversification Opportunities for Investment and American Funds
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Investment and American is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Investment Of America 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 Investment 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 Investment Of America 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 Investment i.e., Investment and American Funds go up and down completely randomly.
Pair Corralation between Investment and American Funds
Assuming the 90 days horizon Investment is expected to generate 1.17 times less return on investment than American Funds. But when comparing it to its historical volatility, Investment Of America is 1.06 times less risky than American Funds. It trades about 0.12 of its potential returns per unit of risk. American Funds Fundamental is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,235 in American Funds Fundamental on January 25, 2024 and sell it today you would earn a total of 485.00 from holding American Funds Fundamental or generate 6.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment Of America vs. American Funds Fundamental
Performance |
| Timeline |
| Investment Of America |
| American Funds Funda |
Investment and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment and American Funds
The main advantage of trading using opposite Investment and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment 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.| Investment vs. Growth Fund Of | Investment vs. Europacific Growth Fund | Investment vs. Smallcap World Fund | Investment vs. New World Fund |
| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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