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 Global, 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
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CGTCX and American is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and American Funds Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global 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 Global 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 2.4 times less return on investment than American Funds. But when comparing it to its historical volatility, Us Government Securities is 2.17 times less risky than American Funds. It trades about 0.03 of its potential returns per unit of risk. American Funds Global is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,381 in American Funds Global on August 28, 2024 and sell it today you would earn a total of 9.00 from holding American Funds Global or generate 0.38% 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 Global
Performance |
| Timeline |
| Us Government Securities |
| American Funds Global |
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. Bond Fund Of | Us Government vs. Capital World Bond | Us Government vs. American Mutual Fund | Us Government vs. Smallcap World Fund |
| American Funds vs. Washington Mutual Investors | American Funds vs. American Balanced Fund | American Funds vs. New World Fund | American Funds vs. Europacific Growth 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |