Can any of the company-specific risk be diversified away by investing in both DOUBLELINE EMERGING 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 DOUBLELINE EMERGING and AMERICAN FUNDS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DOUBLELINE EMERGING MARKETS and AMERICAN FUNDS 2010, you can compare the effects of market volatilities on DOUBLELINE EMERGING 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 DOUBLELINE EMERGING with a short position of AMERICAN FUNDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOUBLELINE EMERGING and AMERICAN FUNDS.
Diversification Opportunities for DOUBLELINE EMERGING and AMERICAN FUNDS
The 3 months correlation between DOUBLELINE and AMERICAN is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding DOUBLELINE EMERGING MARKETS and AMERICAN FUNDS 2010 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FUNDS 2010 and DOUBLELINE EMERGING 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 DOUBLELINE EMERGING MARKETS 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 2010 has no effect on the direction of DOUBLELINE EMERGING i.e., DOUBLELINE EMERGING and AMERICAN FUNDS go up and down completely randomly.
Pair Corralation between DOUBLELINE EMERGING and AMERICAN FUNDS
Assuming the 90 days horizon DOUBLELINE EMERGING MARKETS is expected to generate 0.68 times more return on investment than AMERICAN FUNDS. However, DOUBLELINE EMERGING MARKETS is 1.47 times less risky than AMERICAN FUNDS. It trades about -0.05 of its potential returns per unit of risk. AMERICAN FUNDS 2010 is currently generating about -0.15 per unit of risk. If you would invest 842.00 in DOUBLELINE EMERGING MARKETS on June 27, 2023 and sell it today you would lose (2.00) from holding DOUBLELINE EMERGING MARKETS or give up 0.24% of portfolio value over 90 days.
Over the last 90 days DOUBLELINE EMERGING MARKETS has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, DOUBLELINE EMERGING is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Over the last 90 days AMERICAN FUNDS 2010 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, AMERICAN FUNDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
DOUBLELINE EMERGING and AMERICAN FUNDS Volatility Contrast
Predicted Return Density
Pair Trading with DOUBLELINE EMERGING and AMERICAN FUNDS
The main advantage of trading using opposite DOUBLELINE EMERGING and AMERICAN FUNDS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOUBLELINE EMERGING 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's long position.
The idea behind DOUBLELINE EMERGING MARKETS and AMERICAN FUNDS 2010 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.
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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