Correlation Between Growth Fund and American Funds
Can any of the company-specific risk be diversified away by investing in both Growth 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 Growth 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 Growth Fund Of and American Funds New, you can compare the effects of market volatilities on Growth 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 Growth Fund with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and American Funds.
Diversification Opportunities for Growth Fund and American Funds
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Growth and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of 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 Growth 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 Growth 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 New has no effect on the direction of Growth Fund i.e., Growth Fund and American Funds go up and down completely randomly.
Pair Corralation between Growth Fund and American Funds
Assuming the 90 days horizon Growth Fund Of is expected to generate 1.08 times more return on investment than American Funds. However, Growth Fund is 1.08 times more volatile than American Funds New. It trades about 0.13 of its potential returns per unit of risk. American Funds New is currently generating about 0.09 per unit of risk. If you would invest 4,631 in Growth Fund Of on August 31, 2024 and sell it today you would earn a total of 3,425 from holding Growth Fund Of or generate 73.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. American Funds New
Performance |
| Timeline |
| Growth Fund |
| American Funds New |
Growth Fund and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and American Funds
The main advantage of trading using opposite Growth Fund and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth 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.| Growth Fund vs. Europacific Growth Fund | Growth Fund vs. Washington Mutual Investors | Growth Fund vs. Capital World Growth | Growth Fund vs. HUMANA INC |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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