Correlation Between Amcap Fund and New Economy
Can any of the company-specific risk be diversified away by investing in both Amcap Fund and New Economy 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 Amcap Fund and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amcap Fund Class and New Economy Fund, you can compare the effects of market volatilities on Amcap Fund and New Economy 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 Amcap Fund with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and New Economy.
Diversification Opportunities for Amcap Fund and New Economy
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Amcap and New is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Amcap 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 Amcap Fund Class are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Amcap Fund i.e., Amcap Fund and New Economy go up and down completely randomly.
Pair Corralation between Amcap Fund and New Economy
Assuming the 90 days horizon Amcap Fund Class is expected to generate 0.8 times more return on investment than New Economy. However, Amcap Fund Class is 1.25 times less risky than New Economy. It trades about 0.07 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.05 per unit of risk. If you would invest 3,223 in Amcap Fund Class on November 3, 2024 and sell it today you would earn a total of 302.00 from holding Amcap Fund Class or generate 9.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amcap Fund Class vs. New Economy Fund
Performance |
| Timeline |
| Amcap Fund Class |
| New Economy Fund |
Amcap Fund and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amcap Fund and New Economy
The main advantage of trading using opposite Amcap Fund and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Amcap Fund vs. California Municipal Portfolio | Amcap Fund vs. Jpmorgan Ultra Short Municipal | Amcap Fund vs. Nuveen Strategic Municipal | Amcap Fund vs. Goldman Sachs Short |
| New Economy vs. Oppenheimer Gold Special | New Economy vs. International Investors Gold | New Economy vs. First Eagle Gold | New Economy vs. Gold Portfolio Fidelity |
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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