Correlation Between American Funds and Northeast Investors
Can any of the company-specific risk be diversified away by investing in both American Funds and Northeast Investors 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 Northeast Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Global and Northeast Investors Trust, you can compare the effects of market volatilities on American Funds and Northeast Investors 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 Northeast Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Northeast Investors.
Diversification Opportunities for American Funds and Northeast Investors
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Northeast is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Global and Northeast Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Investors Trust 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 Global are associated (or correlated) with Northeast Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Investors Trust has no effect on the direction of American Funds i.e., American Funds and Northeast Investors go up and down completely randomly.
Pair Corralation between American Funds and Northeast Investors
Assuming the 90 days horizon American Funds Global is expected to generate 2.8 times more return on investment than Northeast Investors. However, American Funds is 2.8 times more volatile than Northeast Investors Trust. It trades about 0.07 of its potential returns per unit of risk. Northeast Investors Trust is currently generating about 0.08 per unit of risk. If you would invest 2,261 in American Funds Global on September 15, 2024 and sell it today you would earn a total of 174.00 from holding American Funds Global or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Global vs. Northeast Investors Trust
Performance |
| Timeline |
| American Funds Global |
| Northeast Investors Trust |
American Funds and Northeast Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Northeast Investors
The main advantage of trading using opposite American Funds and Northeast Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Northeast Investors 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 Northeast Investors will offset losses from the drop in Northeast Investors' long position.| American Funds vs. Prudential Short Duration | American Funds vs. Easterly Snow Longshort | American Funds vs. Alpine Ultra Short | American Funds vs. Boston Partners Longshort |
| Northeast Investors vs. Nuveen Municipal High | Northeast Investors vs. Morningstar Aggressive Growth | Northeast Investors vs. California High Yield Municipal | Northeast Investors vs. Ab High 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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