Correlation Between American Funds and Smallcap Growth
Can any of the company-specific risk be diversified away by investing in both American Funds and Smallcap Growth 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 Smallcap Growth 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 Smallcap Growth Fund, you can compare the effects of market volatilities on American Funds and Smallcap Growth 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 Smallcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Smallcap Growth.
Diversification Opportunities for American Funds and Smallcap Growth
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Smallcap is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Growth 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 Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of American Funds i.e., American Funds and Smallcap Growth go up and down completely randomly.
Pair Corralation between American Funds and Smallcap Growth
If you would invest 8,194 in American Funds Fundamental on October 24, 2024 and sell it today you would earn a total of 259.00 from holding American Funds Fundamental or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 5.56% |
| Values | Daily Returns |
American Funds Fundamental vs. Smallcap Growth Fund
Performance |
| Timeline |
| American Funds Funda |
| Smallcap Growth |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
American Funds and Smallcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Smallcap Growth
The main advantage of trading using opposite American Funds and Smallcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Smallcap Growth 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 Smallcap Growth will offset losses from the drop in Smallcap Growth's long position.| American Funds vs. Virtus High Yield | American Funds vs. Ab High Income | American Funds vs. Multi Manager High Yield | American Funds vs. Ab High Income |
| Smallcap Growth vs. John Hancock Financial | Smallcap Growth vs. Vanguard Financials Index | Smallcap Growth vs. Prudential Financial Services | Smallcap Growth vs. Hennessy Small Cap |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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