Correlation Between American Funds and Via Renewables
Can any of the company-specific risk be diversified away by investing in both American Funds and Via Renewables 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 Via Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2050 and Via Renewables, you can compare the effects of market volatilities on American Funds and Via Renewables 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 Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Via Renewables.
Diversification Opportunities for American Funds and Via Renewables
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Via is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2050 and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables 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 2050 are associated (or correlated) with Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of American Funds i.e., American Funds and Via Renewables go up and down completely randomly.
Pair Corralation between American Funds and Via Renewables
Assuming the 90 days horizon American Funds is expected to generate 3.53 times less return on investment than Via Renewables. But when comparing it to its historical volatility, American Funds 2050 is 1.89 times less risky than Via Renewables. It trades about 0.14 of its potential returns per unit of risk. Via Renewables is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,130 in Via Renewables on September 13, 2024 and sell it today you would earn a total of 105.00 from holding Via Renewables or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2050 vs. Via Renewables
Performance |
| Timeline |
| American Funds 2050 |
| Via Renewables |
American Funds and Via Renewables Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Via Renewables
The main advantage of trading using opposite American Funds and Via Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Via Renewables 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 Via Renewables will offset losses from the drop in Via Renewables' long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Via Renewables vs. CMS Energy | Via Renewables vs. ACRES Commercial Realty | Via Renewables vs. Atlanticus Holdings Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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