Correlation Between One Choice and American Funds
Can any of the company-specific risk be diversified away by investing in both One Choice and American Funds 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 One Choice and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between One Choice Portfolio and American Funds Growth, you can compare the effects of market volatilities on One Choice and American Funds 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 One Choice with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of One Choice and American Funds.
Diversification Opportunities for One Choice and American Funds
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between One and American is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding One Choice Portfolio and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and One Choice 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 One Choice Portfolio are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of One Choice i.e., One Choice and American Funds go up and down completely randomly.
Pair Corralation between One Choice and American Funds
Assuming the 90 days horizon One Choice is expected to generate 1.06 times less return on investment than American Funds. But when comparing it to its historical volatility, One Choice Portfolio is 3.01 times less risky than American Funds. It trades about 0.24 of its potential returns per unit of risk. American Funds Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,740 in American Funds Growth on September 13, 2024 and sell it today you would earn a total of 29.00 from holding American Funds Growth or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
One Choice Portfolio vs. American Funds Growth
Performance |
| Timeline |
| One Choice Portfolio |
| American Funds Growth |
One Choice and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with One Choice and American Funds
The main advantage of trading using opposite One Choice and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One Choice position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| One Choice vs. One Choice Portfolio | One Choice vs. One Choice Portfolio | One Choice vs. One Choice Portfolio | One Choice vs. One Choice Portfolio |
| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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