Correlation Between American Funds and VanEck Intermediate
Can any of the company-specific risk be diversified away by investing in both American Funds and VanEck Intermediate 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 VanEck Intermediate 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 VanEck Intermediate Muni, you can compare the effects of market volatilities on American Funds and VanEck Intermediate 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 VanEck Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and VanEck Intermediate.
Diversification Opportunities for American Funds and VanEck Intermediate
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and VanEck is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and VanEck Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Intermediate Muni 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 VanEck Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Intermediate Muni has no effect on the direction of American Funds i.e., American Funds and VanEck Intermediate go up and down completely randomly.
Pair Corralation between American Funds and VanEck Intermediate
Assuming the 90 days horizon American Funds Fundamental is expected to generate 4.27 times more return on investment than VanEck Intermediate. However, American Funds is 4.27 times more volatile than VanEck Intermediate Muni. It trades about 0.2 of its potential returns per unit of risk. VanEck Intermediate Muni is currently generating about -0.1 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. VanEck Intermediate Muni
Performance |
| Timeline |
| American Funds Funda |
| VanEck Intermediate Muni |
American Funds and VanEck Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and VanEck Intermediate
The main advantage of trading using opposite American Funds and VanEck Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, VanEck Intermediate 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 VanEck Intermediate will offset losses from the drop in VanEck Intermediate'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 |
| VanEck Intermediate vs. VanEck Long Muni | VanEck Intermediate vs. VanEck Short Muni | VanEck Intermediate vs. SPDR Nuveen Bloomberg | VanEck Intermediate vs. Invesco National AMT Free |
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.
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