Correlation Between American Funds and West Loop
Can any of the company-specific risk be diversified away by investing in both American Funds and West Loop 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 West Loop 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 West Loop Realty, you can compare the effects of market volatilities on American Funds and West Loop 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 West Loop. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and West Loop.
Diversification Opportunities for American Funds and West Loop
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and West is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and West Loop Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Loop Realty 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 West Loop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Loop Realty has no effect on the direction of American Funds i.e., American Funds and West Loop go up and down completely randomly.
Pair Corralation between American Funds and West Loop
Assuming the 90 days horizon American Funds Fundamental is expected to generate 0.29 times more return on investment than West Loop. However, American Funds Fundamental is 3.41 times less risky than West Loop. It trades about 0.19 of its potential returns per unit of risk. West Loop Realty is currently generating about -0.17 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 259.00 from holding American Funds Fundamental or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Funds Fundamental vs. West Loop Realty
Performance |
| Timeline |
| American Funds Funda |
| West Loop Realty |
American Funds and West Loop Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and West Loop
The main advantage of trading using opposite American Funds and West Loop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, West Loop 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 West Loop will offset losses from the drop in West Loop'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 |
| West Loop vs. Blackrock Global Longshort | West Loop vs. Rbc Short Duration | West Loop vs. Baird Short Term Bond | West Loop vs. Oakhurst Short Duration |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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