Correlation Between American Funds and The Bond
Can any of the company-specific risk be diversified away by investing in both American Funds and The Bond 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 The Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and The Bond Fund, you can compare the effects of market volatilities on American Funds and The Bond 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 The Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and The Bond.
Diversification Opportunities for American Funds and The Bond
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and The is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and The Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Fund 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 Fundamental are associated (or correlated) with The Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Fund has no effect on the direction of American Funds i.e., American Funds and The Bond go up and down completely randomly.
Pair Corralation between American Funds and The Bond
Assuming the 90 days horizon American Funds Fundamental is expected to generate 3.27 times more return on investment than The Bond. However, American Funds is 3.27 times more volatile than The Bond Fund. It trades about 0.2 of its potential returns per unit of risk. The Bond Fund is currently generating about 0.05 per unit of risk. If you would invest 8,096 in American Funds Fundamental on November 3, 2024 and sell it today you would earn a total of 322.00 from holding American Funds Fundamental or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. The Bond Fund
Performance |
| Timeline |
| American Funds Funda |
| Bond Fund |
American Funds and The Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and The Bond
The main advantage of trading using opposite American Funds and The Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, The Bond 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 The Bond will offset losses from the drop in The Bond's long position.| American Funds vs. Federated Emerging Market | American Funds vs. Siit Emerging Markets | American Funds vs. Mid Cap 15x Strategy | American Funds vs. Ashmore Emerging Markets |
| The Bond vs. Stringer Growth Fund | The Bond vs. Praxis Genesis Growth | The Bond vs. Mid Cap Growth | The Bond vs. Growth Allocation Fund |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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