Correlation Between American Funds and Income Fund

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Can any of the company-specific risk be diversified away by investing in both American Funds and Income Fund 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 Income Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds The and Income Fund Of, you can compare the effects of market volatilities on American Funds and Income Fund 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Income Fund.

Diversification Opportunities for American Funds and Income Fund

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between American and Income is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Income Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund 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 The are associated (or correlated) with Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund has no effect on the direction of American Funds i.e., American Funds and Income Fund go up and down completely randomly.

Pair Corralation between American Funds and Income Fund

Assuming the 90 days horizon American Funds The is expected to generate 2.0 times more return on investment than Income Fund. However, American Funds is 2.0 times more volatile than Income Fund Of. It trades about 0.09 of its potential returns per unit of risk. Income Fund Of is currently generating about 0.16 per unit of risk. If you would invest  7,318  in American Funds The on April 25, 2024 and sell it today you would earn a total of  116.00  from holding American Funds The or generate 1.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

American Funds The  vs.  Income Fund Of

 Performance 
       Timeline  
American Funds 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds The are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in August 2024.
Income Fund 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Income Fund Of are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Income Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds and Income Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Funds and Income Fund

The main advantage of trading using opposite American Funds and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Income Fund 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 Income Fund will offset losses from the drop in Income Fund's long position.
The idea behind American Funds The and Income Fund Of 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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