Correlation Between American Funds and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both American Funds and Amcap Fund 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 American Funds and Amcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Strategic and Amcap Fund Class, you can compare the effects of market volatilities on American Funds and Amcap Fund 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 American Funds with a short position of Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Amcap Fund.
Diversification Opportunities for American Funds and Amcap Fund
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and AMCAP is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Strategic and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class and American Funds 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 American Funds Strategic are associated (or correlated) with Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of American Funds i.e., American Funds and Amcap Fund go up and down completely randomly.
Pair Corralation between American Funds and Amcap Fund
Assuming the 90 days horizon American Funds is expected to generate 44.45 times less return on investment than Amcap Fund. But when comparing it to its historical volatility, American Funds Strategic is 2.38 times less risky than Amcap Fund. It trades about 0.02 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 4,486 in Amcap Fund Class on September 1, 2024 and sell it today you would earn a total of 237.00 from holding Amcap Fund Class or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds Strategic vs. Amcap Fund Class
Performance |
| Timeline |
| American Funds Strategic |
| Amcap Fund Class |
American Funds and Amcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Amcap Fund
The main advantage of trading using opposite American Funds and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Amcap Fund 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 Amcap Fund will offset losses from the drop in Amcap Fund's long position.| American Funds vs. Gmo High Yield | American Funds vs. Alpine High Yield | American Funds vs. Msift High Yield | American Funds vs. Virtus High Yield |
| Amcap Fund vs. The Gabelli Equity | Amcap Fund vs. Calamos Global Equity | Amcap Fund vs. Jpmorgan Equity Income | Amcap Fund vs. Small Cap Equity |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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