Correlation Between Amcap Fund and Transamerica Intermediate
Can any of the company-specific risk be diversified away by investing in both Amcap Fund and Transamerica Intermediate 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 Transamerica Intermediate 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 Transamerica Intermediate Muni, you can compare the effects of market volatilities on Amcap Fund and Transamerica Intermediate 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 Transamerica Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Transamerica Intermediate.
Diversification Opportunities for Amcap Fund and Transamerica Intermediate
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amcap and Transamerica is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Transamerica Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Intermediate 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 Transamerica Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Intermediate has no effect on the direction of Amcap Fund i.e., Amcap Fund and Transamerica Intermediate go up and down completely randomly.
Pair Corralation between Amcap Fund and Transamerica Intermediate
Assuming the 90 days horizon Amcap Fund Class is expected to generate 3.79 times more return on investment than Transamerica Intermediate. However, Amcap Fund is 3.79 times more volatile than Transamerica Intermediate Muni. It trades about 0.09 of its potential returns per unit of risk. Transamerica Intermediate Muni is currently generating about 0.07 per unit of risk. If you would invest 2,515 in Amcap Fund Class on August 27, 2024 and sell it today you would earn a total of 1,135 from holding Amcap Fund Class or generate 45.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amcap Fund Class vs. Transamerica Intermediate Muni
Performance |
| Timeline |
| Amcap Fund Class |
| Transamerica Intermediate |
Amcap Fund and Transamerica Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amcap Fund and Transamerica Intermediate
The main advantage of trading using opposite Amcap Fund and Transamerica Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, Transamerica Intermediate 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 Transamerica Intermediate will offset losses from the drop in Transamerica Intermediate's long position.| Amcap Fund vs. Transamerica Intermediate Muni | Amcap Fund vs. Counterpoint Tactical Municipal | Amcap Fund vs. T Rowe Price | Amcap Fund vs. Morningstar Municipal Bond |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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