Correlation Between Investment and American Funds
Can any of the company-specific risk be diversified away by investing in both Investment 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 Investment and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Of America and American Funds New, you can compare the effects of market volatilities on Investment 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 Investment with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and American Funds.
Diversification Opportunities for Investment and American Funds
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Investment and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Investment Of America and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New and Investment 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 Investment Of America 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 New has no effect on the direction of Investment i.e., Investment and American Funds go up and down completely randomly.
Pair Corralation between Investment and American Funds
Assuming the 90 days horizon Investment Of America is expected to generate 0.88 times more return on investment than American Funds. However, Investment Of America is 1.13 times less risky than American Funds. It trades about 0.12 of its potential returns per unit of risk. American Funds New is currently generating about 0.08 per unit of risk. If you would invest 3,948 in Investment Of America on September 1, 2024 and sell it today you would earn a total of 2,336 from holding Investment Of America or generate 59.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment Of America vs. American Funds New
Performance |
| Timeline |
| Investment Of America |
| American Funds New |
Investment and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment and American Funds
The main advantage of trading using opposite Investment and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment 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.| Investment vs. Income Fund Of | Investment vs. New World Fund | Investment vs. American Mutual Fund | Investment vs. American Mutual Fund |
| American Funds vs. Smallcap World Fund | American Funds vs. New World Fund | American Funds vs. New Perspective Fund | American Funds vs. Investment Of America |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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