Correlation Between Fabxx and American Funds
Can any of the company-specific risk be diversified away by investing in both Fabxx 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 Fabxx and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabxx and American Funds 2050, you can compare the effects of market volatilities on Fabxx 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 Fabxx with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabxx and American Funds.
Diversification Opportunities for Fabxx and American Funds
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fabxx and American is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fabxx and American Funds 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2050 and Fabxx 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 Fabxx 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 2050 has no effect on the direction of Fabxx i.e., Fabxx and American Funds go up and down completely randomly.
Pair Corralation between Fabxx and American Funds
Assuming the 90 days horizon Fabxx is expected to under-perform the American Funds. In addition to that, Fabxx is 22.6 times more volatile than American Funds 2050. It trades about -0.22 of its total potential returns per unit of risk. American Funds 2050 is currently generating about -0.02 per unit of volatility. If you would invest 2,127 in American Funds 2050 on September 12, 2024 and sell it today you would lose (4.00) from holding American Funds 2050 or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabxx vs. American Funds 2050
Performance |
| Timeline |
| Fabxx |
| American Funds 2050 |
Fabxx and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabxx and American Funds
The main advantage of trading using opposite Fabxx and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabxx 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.| Fabxx vs. Vanguard Total Stock | Fabxx vs. Vanguard 500 Index | Fabxx vs. Vanguard Total Stock | Fabxx vs. Vanguard Total Stock |
| American Funds vs. Vanguard Target Retirement | American Funds vs. American Funds 2050 | American Funds vs. HUMANA INC | American Funds vs. Barloworld Ltd ADR |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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