Correlation Between American Funds and Deutsche Small
Can any of the company-specific risk be diversified away by investing in both American Funds and Deutsche Small 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 Deutsche Small 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 Deutsche Small Cap, you can compare the effects of market volatilities on American Funds and Deutsche Small 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 Deutsche Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Deutsche Small.
Diversification Opportunities for American Funds and Deutsche Small
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Deutsche is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Deutsche Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Small Cap 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 Deutsche Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Small Cap has no effect on the direction of American Funds i.e., American Funds and Deutsche Small go up and down completely randomly.
Pair Corralation between American Funds and Deutsche Small
Assuming the 90 days horizon American Funds Fundamental is expected to generate 0.9 times more return on investment than Deutsche Small. However, American Funds Fundamental is 1.11 times less risky than Deutsche Small. It trades about 0.06 of its potential returns per unit of risk. Deutsche Small Cap is currently generating about 0.03 per unit of risk. If you would invest 7,352 in American Funds Fundamental on November 3, 2024 and sell it today you would earn a total of 1,066 from holding American Funds Fundamental or generate 14.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. Deutsche Small Cap
Performance |
| Timeline |
| American Funds Funda |
| Deutsche Small Cap |
American Funds and Deutsche Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Deutsche Small
The main advantage of trading using opposite American Funds and Deutsche Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Deutsche Small 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 Deutsche Small will offset losses from the drop in Deutsche Small'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 |
| Deutsche Small vs. Dunham High Yield | Deutsche Small vs. Artisan High Income | Deutsche Small vs. Siit High Yield | Deutsche Small vs. Msift High Yield |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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