Correlation Between Global Alpha and American Funds
Can any of the company-specific risk be diversified away by investing in both Global Alpha 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 Global Alpha and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Global Alpha and American Funds New, you can compare the effects of market volatilities on Global Alpha 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 Global Alpha with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Alpha and American Funds.
Diversification Opportunities for Global Alpha and American Funds
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Global Alpha and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New and Global Alpha 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 The Global Alpha 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 New has no effect on the direction of Global Alpha i.e., Global Alpha and American Funds go up and down completely randomly.
Pair Corralation between Global Alpha and American Funds
Assuming the 90 days horizon Global Alpha is expected to generate 1.25 times less return on investment than American Funds. In addition to that, Global Alpha is 1.07 times more volatile than American Funds New. It trades about 0.06 of its total potential returns per unit of risk. American Funds New is currently generating about 0.08 per unit of volatility. If you would invest 5,324 in American Funds New on September 12, 2024 and sell it today you would earn a total of 1,427 from holding American Funds New or generate 26.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Global Alpha vs. American Funds New
Performance |
| Timeline |
| Global Alpha |
| American Funds New |
Global Alpha and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Alpha and American Funds
The main advantage of trading using opposite Global Alpha and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Alpha 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.| Global Alpha vs. American Funds New | Global Alpha vs. American Funds New | Global Alpha vs. New Perspective Fund | Global Alpha vs. New Perspective Fund |
| American Funds vs. American Funds New | American Funds vs. New Perspective Fund | American Funds vs. New Perspective Fund | American Funds vs. New Perspective 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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