Correlation Between Eafe Choice and American Funds
Can any of the company-specific risk be diversified away by investing in both Eafe 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 Eafe 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 The Eafe Choice and American Funds Inflation, you can compare the effects of market volatilities on Eafe 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 Eafe Choice with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eafe Choice and American Funds.
Diversification Opportunities for Eafe Choice and American Funds
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EAFE and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Eafe Choice and American Funds Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Inflation and Eafe 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 The Eafe Choice 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 Inflation has no effect on the direction of Eafe Choice i.e., Eafe Choice and American Funds go up and down completely randomly.
Pair Corralation between Eafe Choice and American Funds
Assuming the 90 days horizon The Eafe Choice is expected to generate 3.4 times more return on investment than American Funds. However, Eafe Choice is 3.4 times more volatile than American Funds Inflation. It trades about 0.13 of its potential returns per unit of risk. American Funds Inflation is currently generating about 0.29 per unit of risk. If you would invest 1,464 in The Eafe Choice on November 29, 2024 and sell it today you would earn a total of 33.00 from holding The Eafe Choice or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Eafe Choice vs. American Funds Inflation
Performance |
| Timeline |
| Eafe Choice |
| American Funds Inflation |
Eafe Choice and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eafe Choice and American Funds
The main advantage of trading using opposite Eafe Choice and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eafe 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.| Eafe Choice vs. Hartford Moderate Allocation | Eafe Choice vs. Blackrock Moderate Prepared | Eafe Choice vs. College Retirement Equities | Eafe Choice vs. Franklin Lifesmart Retirement |
| American Funds vs. Great West Moderately Servative | American Funds vs. Voya Retirement Growth | American Funds vs. Vanguard Target Retirement | American Funds vs. Dimensional Retirement Income |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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