Correlation Between American Funds and Pace High
Can any of the company-specific risk be diversified away by investing in both American Funds and Pace High 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 Pace High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Developing and Pace High Yield, you can compare the effects of market volatilities on American Funds and Pace High 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 Pace High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Pace High.
Diversification Opportunities for American Funds and Pace High
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Pace is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Developing and Pace High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace High Yield 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 Developing are associated (or correlated) with Pace High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace High Yield has no effect on the direction of American Funds i.e., American Funds and Pace High go up and down completely randomly.
Pair Corralation between American Funds and Pace High
Assuming the 90 days horizon American Funds is expected to generate 1.61 times less return on investment than Pace High. In addition to that, American Funds is 3.42 times more volatile than Pace High Yield. It trades about 0.03 of its total potential returns per unit of risk. Pace High Yield is currently generating about 0.15 per unit of volatility. If you would invest 746.00 in Pace High Yield on September 3, 2024 and sell it today you would earn a total of 131.00 from holding Pace High Yield or generate 17.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Developing vs. Pace High Yield
Performance |
| Timeline |
| American Funds Developing |
| Pace High Yield |
American Funds and Pace High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Pace High
The main advantage of trading using opposite American Funds and Pace High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Pace High 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 Pace High will offset losses from the drop in Pace High's long position.| American Funds vs. T Rowe Price | American Funds vs. California High Yield Municipal | American Funds vs. Vanguard California Long Term | American Funds vs. Nuveen Minnesota Municipal |
| Pace High vs. Western Assets Emerging | Pace High vs. Mondrian Emerging Markets | Pace High vs. Transamerica Emerging Markets | Pace High vs. Morgan Stanley Emerging |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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