Correlation Between Bond Fund and American Funds
Can any of the company-specific risk be diversified away by investing in both Bond Fund 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 Bond Fund and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bond Fund Of and American Funds Strategic, you can compare the effects of market volatilities on Bond Fund 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 Bond Fund with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bond Fund and American Funds.
Diversification Opportunities for Bond Fund and American Funds
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Bond and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Bond Fund Of and American Funds Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Strategic and Bond Fund 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 Bond Fund Of 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 Strategic has no effect on the direction of Bond Fund i.e., Bond Fund and American Funds go up and down completely randomly.
Pair Corralation between Bond Fund and American Funds
Assuming the 90 days horizon Bond Fund Of is expected to generate 0.95 times more return on investment than American Funds. However, Bond Fund Of is 1.05 times less risky than American Funds. It trades about 0.03 of its potential returns per unit of risk. American Funds Strategic is currently generating about 0.01 per unit of risk. If you would invest 1,074 in Bond Fund Of on September 1, 2024 and sell it today you would earn a total of 61.00 from holding Bond Fund Of or generate 5.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bond Fund Of vs. American Funds Strategic
Performance |
| Timeline |
| Bond Fund |
| American Funds Strategic |
Bond Fund and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bond Fund and American Funds
The main advantage of trading using opposite Bond Fund and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bond Fund 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.| Bond Fund vs. American High Income | Bond Fund vs. Europacific Growth Fund | Bond Fund vs. Capital World Bond | Bond Fund vs. Growth Fund Of |
| American Funds vs. American Funds Inflation | American Funds vs. Bond Fund Of | American Funds vs. Us Government Securities | American Funds vs. Baron Global Advantage |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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