Correlation Between Income Fund and American Funds
Can any of the company-specific risk be diversified away by investing in both Income Fund 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 Income Fund and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and American Funds 2040, you can compare the effects of market volatilities on Income Fund 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 Income Fund with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and American Funds.
Diversification Opportunities for Income Fund and American Funds
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and American is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of 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 Income Fund 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 Income Fund Of 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 Income Fund i.e., Income Fund and American Funds go up and down completely randomly.
Pair Corralation between Income Fund and American Funds
Assuming the 90 days horizon Income Fund Of is expected to under-perform the American Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Income Fund Of is 1.4 times less risky than American Funds. The mutual fund trades about -0.05 of its potential returns per unit of risk. The American Funds 2040 is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,116 in American Funds 2040 on August 24, 2024 and sell it today you would lose (1.00) from holding American Funds 2040 or give up 0.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Of vs. American Funds 2040
Performance |
| Timeline |
| Income Fund |
| American Funds 2040 |
Income Fund and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and American Funds
The main advantage of trading using opposite Income Fund and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund 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.| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced | Income Fund vs. American Funds Fundamental |
| American Funds vs. Jhancock Disciplined Value | American Funds vs. Dunham Large Cap | American Funds vs. Large Cap Value Profund | American Funds vs. Americafirst Large Cap |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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