Correlation Between American Funds and CHINA WATER
Can any of the company-specific risk be diversified away by investing in both American Funds and CHINA WATER 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 CHINA WATER 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 CHINA WATER IGR, you can compare the effects of market volatilities on American Funds and CHINA WATER 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 CHINA WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and CHINA WATER.
Diversification Opportunities for American Funds and CHINA WATER
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and CHINA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and CHINA WATER IGR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA WATER IGR 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 CHINA WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA WATER IGR has no effect on the direction of American Funds i.e., American Funds and CHINA WATER go up and down completely randomly.
Pair Corralation between American Funds and CHINA WATER
Assuming the 90 days horizon American Funds Fundamental is expected to generate 0.07 times more return on investment than CHINA WATER. However, American Funds Fundamental is 14.59 times less risky than CHINA WATER. It trades about 0.2 of its potential returns per unit of risk. CHINA WATER IGR is currently generating about -0.22 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 | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Funds Fundamental vs. CHINA WATER IGR
Performance |
| Timeline |
| American Funds Funda |
| CHINA WATER IGR |
American Funds and CHINA WATER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and CHINA WATER
The main advantage of trading using opposite American Funds and CHINA WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, CHINA WATER 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 CHINA WATER will offset losses from the drop in CHINA WATER'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 |
| CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |