Correlation Between Amcap Fund and New Perspective
Can any of the company-specific risk be diversified away by investing in both Amcap Fund and New Perspective 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 Perspective 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 Perspective Fund, you can compare the effects of market volatilities on Amcap Fund and New Perspective 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 Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and New Perspective.
Diversification Opportunities for Amcap Fund and New Perspective
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Amcap and New is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Amcap Fund i.e., Amcap Fund and New Perspective go up and down completely randomly.
Pair Corralation between Amcap Fund and New Perspective
Assuming the 90 days horizon Amcap Fund Class is expected to generate 1.32 times more return on investment than New Perspective. However, Amcap Fund is 1.32 times more volatile than New Perspective Fund. It trades about 0.14 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.03 per unit of risk. If you would invest 4,405 in Amcap Fund Class on August 28, 2024 and sell it today you would earn a total of 125.00 from holding Amcap Fund Class or generate 2.84% 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 Perspective Fund
Performance |
| Timeline |
| Amcap Fund Class |
| New Perspective |
Amcap Fund and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amcap Fund and New Perspective
The main advantage of trading using opposite Amcap Fund and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, New Perspective 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 Perspective will offset losses from the drop in New Perspective's 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 |
| New Perspective vs. New World Fund | New Perspective vs. Capital World Growth | New Perspective vs. Smallcap World Fund | New Perspective vs. Investment Of America |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |