Correlation Between American Funds and Principal Active
Can any of the company-specific risk be diversified away by investing in both American Funds and Principal Active 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 Principal Active 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 Principal Active High, you can compare the effects of market volatilities on American Funds and Principal Active 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 Principal Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Principal Active.
Diversification Opportunities for American Funds and Principal Active
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Principal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Principal Active High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Active 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 Principal Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Active High has no effect on the direction of American Funds i.e., American Funds and Principal Active go up and down completely randomly.
Pair Corralation between American Funds and Principal Active
Assuming the 90 days horizon American Funds Fundamental is expected to generate 2.4 times more return on investment than Principal Active. However, American Funds is 2.4 times more volatile than Principal Active High. It trades about 0.2 of its potential returns per unit of risk. Principal Active High is currently generating about 0.23 per unit of risk. 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. Principal Active High
Performance |
| Timeline |
| American Funds Funda |
| Principal Active High |
American Funds and Principal Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Principal Active
The main advantage of trading using opposite American Funds and Principal Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Principal Active 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 Principal Active will offset losses from the drop in Principal Active'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 |
| Principal Active vs. SPDR SSgA Income | Principal Active vs. First Trust Income | Principal Active vs. Saba Closed End Funds | Principal Active vs. Xtrackers 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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