Correlation Between Amcap Fund and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Amcap Fund and Smallcap World 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 Smallcap World 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 Smallcap World Fund, you can compare the effects of market volatilities on Amcap Fund and Smallcap World 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 Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Smallcap World.
Diversification Opportunities for Amcap Fund and Smallcap World
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amcap and Smallcap is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World 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 Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Amcap Fund i.e., Amcap Fund and Smallcap World go up and down completely randomly.
Pair Corralation between Amcap Fund and Smallcap World
Assuming the 90 days horizon Amcap Fund Class is expected to generate 1.07 times more return on investment than Smallcap World. However, Amcap Fund is 1.07 times more volatile than Smallcap World Fund. It trades about 0.1 of its potential returns per unit of risk. Smallcap World Fund is currently generating about -0.01 per unit of risk. If you would invest 3,565 in Amcap Fund Class on August 28, 2024 and sell it today you would earn a total of 118.00 from holding Amcap Fund Class or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Amcap Fund Class vs. Smallcap World Fund
Performance |
| Timeline |
| Amcap Fund Class |
| Smallcap World |
Amcap Fund and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amcap Fund and Smallcap World
The main advantage of trading using opposite Amcap Fund and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.| Amcap Fund vs. Financials Ultrasector Profund | Amcap Fund vs. Angel Oak Financial | Amcap Fund vs. 1919 Financial Services | Amcap Fund vs. John Hancock Financial |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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