Correlation Between Enhanced and American Funds
Can any of the company-specific risk be diversified away by investing in both Enhanced 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 Enhanced and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enhanced Large Pany and American Funds 2020, you can compare the effects of market volatilities on Enhanced 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 Enhanced with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced and American Funds.
Diversification Opportunities for Enhanced and American Funds
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Enhanced and American is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and American Funds 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2020 and Enhanced 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 Enhanced Large Pany 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 2020 has no effect on the direction of Enhanced i.e., Enhanced and American Funds go up and down completely randomly.
Pair Corralation between Enhanced and American Funds
Assuming the 90 days horizon Enhanced Large Pany is expected to generate 2.42 times more return on investment than American Funds. However, Enhanced is 2.42 times more volatile than American Funds 2020. It trades about 0.37 of its potential returns per unit of risk. American Funds 2020 is currently generating about 0.25 per unit of risk. If you would invest 1,476 in Enhanced Large Pany on September 1, 2024 and sell it today you would earn a total of 89.00 from holding Enhanced Large Pany or generate 6.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Enhanced Large Pany vs. American Funds 2020
Performance |
| Timeline |
| Enhanced Large Pany |
| American Funds 2020 |
Enhanced and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enhanced and American Funds
The main advantage of trading using opposite Enhanced and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced 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.| Enhanced vs. Us Micro Cap | Enhanced vs. Dfa Short Term Government | Enhanced vs. Emerging Markets Small | Enhanced vs. Dfa One Year Fixed |
| American Funds vs. American Funds 2025 | American Funds vs. American Funds 2030 | American Funds vs. American Funds 2035 | American Funds vs. American Funds 2040 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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