Correlation Between Amcap Fund and American Funds
Can any of the company-specific risk be diversified away by investing in both Amcap 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 Amcap 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 Amcap Fund Class and American Funds Smallcap, you can compare the effects of market volatilities on Amcap 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 Amcap Fund with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and American Funds.
Diversification Opportunities for Amcap Fund and American Funds
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amcap and American is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and American Funds Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Smallcap 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 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 Smallcap has no effect on the direction of Amcap Fund i.e., Amcap Fund and American Funds go up and down completely randomly.
Pair Corralation between Amcap Fund and American Funds
Assuming the 90 days horizon Amcap Fund is expected to generate 1.12 times less return on investment than American Funds. In addition to that, Amcap Fund is 1.09 times more volatile than American Funds Smallcap. It trades about 0.14 of its total potential returns per unit of risk. American Funds Smallcap is currently generating about 0.17 per unit of volatility. If you would invest 7,005 in American Funds Smallcap on August 28, 2024 and sell it today you would earn a total of 225.00 from holding American Funds Smallcap or generate 3.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amcap Fund Class vs. American Funds Smallcap
Performance |
| Timeline |
| Amcap Fund Class |
| American Funds Smallcap |
Amcap Fund and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amcap Fund and American Funds
The main advantage of trading using opposite Amcap Fund and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap 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.| Amcap Fund vs. Europacific Growth Fund | Amcap Fund vs. Capital World Growth | Amcap Fund vs. Washington Mutual Investors | Amcap Fund vs. American Mutual Fund |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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