Correlation Between American Funds and VanEck Short
Can any of the company-specific risk be diversified away by investing in both American Funds and VanEck Short 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 Short 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 Short High, you can compare the effects of market volatilities on American Funds and VanEck Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and VanEck Short.
Diversification Opportunities for American Funds and VanEck Short
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and VanEck is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and VanEck Short High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Short High 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Short High has no effect on the direction of American Funds i.e., American Funds and VanEck Short go up and down completely randomly.
Pair Corralation between American Funds and VanEck Short
Assuming the 90 days horizon American Funds Fundamental is expected to generate 4.22 times more return on investment than VanEck Short. However, American Funds is 4.22 times more volatile than VanEck Short High. It trades about 0.06 of its potential returns per unit of risk. VanEck Short High is currently generating about 0.1 per unit of risk. If you would invest 7,378 in American Funds Fundamental on November 4, 2024 and sell it today you would earn a total of 1,040 from holding American Funds Fundamental or generate 14.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. VanEck Short High
Performance |
| Timeline |
| American Funds Funda |
| VanEck Short High |
American Funds and VanEck Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and VanEck Short
The main advantage of trading using opposite American Funds and VanEck Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, VanEck Short 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 Short will offset losses from the drop in VanEck Short's long position.| American Funds vs. World Energy Fund | American Funds vs. Energy Services Fund | American Funds vs. Alpsalerian Energy Infrastructure | American Funds vs. Icon Natural Resources |
| VanEck Short vs. SPDR Nuveen Bloomberg | VanEck Short vs. VanEck High Yield | VanEck Short vs. VanEck Short Muni | VanEck Short vs. VanEck CEF Municipal |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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