Correlation Between American Funds and Target
Can any of the company-specific risk be diversified away by investing in both American Funds and Target 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 Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Income and Target, you can compare the effects of market volatilities on American Funds and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Target.
Diversification Opportunities for American Funds and Target
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Target is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Income and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Income are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of American Funds i.e., American Funds and Target go up and down completely randomly.
Pair Corralation between American Funds and Target
Assuming the 90 days horizon American Funds is expected to generate 12.0 times less return on investment than Target. But when comparing it to its historical volatility, American Funds Income is 4.94 times less risky than Target. It trades about 0.05 of its potential returns per unit of risk. Target is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 14,148 in Target on January 26, 2024 and sell it today you would earn a total of 2,386 from holding Target or generate 16.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Income vs. Target
Performance |
| Timeline |
| American Funds Me |
| Target |
American Funds and Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Target
The main advantage of trading using opposite American Funds and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.| American Funds vs. Franklin Mutual Global | American Funds vs. Legg Mason Global | American Funds vs. Artisan Global Unconstrained | American Funds vs. Goldman Sachs Global |
| Target vs. Costco Wholesale Corp | Target vs. BJs Wholesale Club | Target vs. Dollar Tree | Target vs. Dollar General |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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