Correlation Between Us Government and American Funds
Can any of the company-specific risk be diversified away by investing in both Us Government 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 Us Government and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and American Funds New, you can compare the effects of market volatilities on Us Government 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 Us Government with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and American Funds.
Diversification Opportunities for Us Government and American Funds
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CGTCX and American is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities 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 Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and American Funds go up and down completely randomly.
Pair Corralation between Us Government and American Funds
Assuming the 90 days horizon Us Government is expected to generate 27.1 times less return on investment than American Funds. But when comparing it to its historical volatility, Us Government Securities is 2.04 times less risky than American Funds. It trades about 0.01 of its potential returns per unit of risk. American Funds New is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,604 in American Funds New on August 31, 2024 and sell it today you would earn a total of 1,970 from holding American Funds New or generate 42.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. American Funds New
Performance |
| Timeline |
| Us Government Securities |
| American Funds New |
Us Government and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and American Funds
The main advantage of trading using opposite Us Government and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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.| Us Government vs. Vanguard Gnma Fund | Us Government vs. Us Government Securities | Us Government vs. American Funds Government | Us Government vs. Fidelity Sai Treasury |
| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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