Correlation Between American Funds and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both American Funds and Litman Gregory 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 Litman Gregory 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 Litman Gregory Masters, you can compare the effects of market volatilities on American Funds and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Litman Gregory.
Diversification Opportunities for American Funds and Litman Gregory
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Litman is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of American Funds i.e., American Funds and Litman Gregory go up and down completely randomly.
Pair Corralation between American Funds and Litman Gregory
Assuming the 90 days horizon American Funds Fundamental is expected to generate 7.83 times more return on investment than Litman Gregory. However, American Funds is 7.83 times more volatile than Litman Gregory Masters. It trades about 0.12 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.48 per unit of risk. If you would invest 8,194 in American Funds Fundamental on October 23, 2024 and sell it today you would earn a total of 144.00 from holding American Funds Fundamental or generate 1.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. Litman Gregory Masters
Performance |
| Timeline |
| American Funds Funda |
| Litman Gregory Masters |
American Funds and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Litman Gregory
The main advantage of trading using opposite American Funds and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| American Funds vs. Small Pany Growth | American Funds vs. Needham Small Cap | American Funds vs. Praxis Small Cap | American Funds vs. Franklin Small Cap |
| Litman Gregory vs. Litman Gregory Masters | Litman Gregory vs. Aqr Managed Futures | Litman Gregory vs. Boston Partners Longshort | Litman Gregory vs. Artisan Global Value |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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