Correlation Between American High-income and American Funds
Can any of the company-specific risk be diversified away by investing in both American High-income 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 American High-income and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income Municipal and American Funds 2035, you can compare the effects of market volatilities on American High-income 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 American High-income with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and American Funds.
Diversification Opportunities for American High-income and American Funds
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and American Funds 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2035 and American High-income 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 High Income Municipal 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 2035 has no effect on the direction of American High-income i.e., American High-income and American Funds go up and down completely randomly.
Pair Corralation between American High-income and American Funds
Assuming the 90 days horizon American High-income is expected to generate 3.38 times less return on investment than American Funds. But when comparing it to its historical volatility, American High Income Municipal is 2.15 times less risky than American Funds. It trades about 0.02 of its potential returns per unit of risk. American Funds 2035 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,908 in American Funds 2035 on November 1, 2024 and sell it today you would earn a total of 21.00 from holding American Funds 2035 or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.33% |
| Values | Daily Returns |
American High Income Municipal vs. American Funds 2035
Performance |
| Timeline |
| American High Income |
| American Funds 2035 |
American High-income and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and American Funds
The main advantage of trading using opposite American High-income and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income 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.| American High-income vs. Virtus Convertible | American High-income vs. Putnam Convertible Securities | American High-income vs. Fidelity Sai Convertible | American High-income vs. Allianzgi Convertible Income |
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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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