Correlation Between American Funds and Science Technology
Can any of the company-specific risk be diversified away by investing in both American Funds and Science Technology 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 Science Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2010 and Science Technology Fund, you can compare the effects of market volatilities on American Funds and Science Technology 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 Science Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Science Technology.
Diversification Opportunities for American Funds and Science Technology
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Science is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2010 and Science Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Technology 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 2010 are associated (or correlated) with Science Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Technology has no effect on the direction of American Funds i.e., American Funds and Science Technology go up and down completely randomly.
Pair Corralation between American Funds and Science Technology
Assuming the 90 days horizon American Funds is expected to generate 2.85 times less return on investment than Science Technology. But when comparing it to its historical volatility, American Funds 2010 is 2.4 times less risky than Science Technology. It trades about 0.08 of its potential returns per unit of risk. Science Technology Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,629 in Science Technology Fund on September 12, 2024 and sell it today you would earn a total of 1,310 from holding Science Technology Fund or generate 80.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2010 vs. Science Technology Fund
Performance |
| Timeline |
| American Funds 2010 |
| Science Technology |
American Funds and Science Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Science Technology
The main advantage of trading using opposite American Funds and Science Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Science Technology 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 Science Technology will offset losses from the drop in Science Technology's long position.| American Funds vs. Transamerica Cleartrack Retirement | American Funds vs. Deutsche Multi Asset Moderate | American Funds vs. Jpmorgan Smartretirement 2035 | American Funds vs. Fidelity Managed Retirement |
| Science Technology vs. Simt Multi Asset Inflation | Science Technology vs. Guidepath Managed Futures | Science Technology vs. Arrow Managed Futures | Science Technology vs. Federated Hermes Inflation |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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