Correlation Between Adams Diversified and American Funds
Can any of the company-specific risk be diversified away by investing in both Adams Diversified 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 Adams Diversified and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Diversified Equity and American Funds 2040, you can compare the effects of market volatilities on Adams Diversified 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 Adams Diversified with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Diversified and American Funds.
Diversification Opportunities for Adams Diversified and American Funds
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Adams and American is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and American Funds 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2040 and Adams Diversified 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 Adams Diversified Equity 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 2040 has no effect on the direction of Adams Diversified i.e., Adams Diversified and American Funds go up and down completely randomly.
Pair Corralation between Adams Diversified and American Funds
Considering the 90-day investment horizon Adams Diversified Equity is expected to generate 1.37 times more return on investment than American Funds. However, Adams Diversified is 1.37 times more volatile than American Funds 2040. It trades about 0.13 of its potential returns per unit of risk. American Funds 2040 is currently generating about 0.11 per unit of risk. If you would invest 1,197 in Adams Diversified Equity on September 12, 2024 and sell it today you would earn a total of 859.00 from holding Adams Diversified Equity or generate 71.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Diversified Equity vs. American Funds 2040
Performance |
| Timeline |
| Adams Diversified Equity |
| American Funds 2040 |
Adams Diversified and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Diversified and American Funds
The main advantage of trading using opposite Adams Diversified and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Diversified 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.| Adams Diversified vs. Tri Continental Closed | Adams Diversified vs. SRH Total Return | Adams Diversified vs. Putnam Municipal Opportunities | Adams Diversified vs. Tortoise Energy Independence |
| American Funds vs. Vanguard Target Retirement | American Funds vs. Vanguard Target Retirement | American Funds vs. Vanguard Target Retirement | American Funds vs. Vanguard Target Retirement |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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