Correlation Between American Funds and Target 2025
Can any of the company-specific risk be diversified away by investing in both American Funds and Target 2025 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 Target 2025 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2025 and Target 2025 Fund, you can compare the effects of market volatilities on American Funds and Target 2025 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 Target 2025. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Target 2025.
Diversification Opportunities for American Funds and Target 2025
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Target is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2025 and Target 2025 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 2025 Fund 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 2025 are associated (or correlated) with Target 2025. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target 2025 Fund has no effect on the direction of American Funds i.e., American Funds and Target 2025 go up and down completely randomly.
Pair Corralation between American Funds and Target 2025
Assuming the 90 days horizon American Funds is expected to generate 1.18 times less return on investment than Target 2025. In addition to that, American Funds is 1.1 times more volatile than Target 2025 Fund. It trades about 0.27 of its total potential returns per unit of risk. Target 2025 Fund is currently generating about 0.36 per unit of volatility. If you would invest 1,373 in Target 2025 Fund on September 4, 2024 and sell it today you would earn a total of 31.00 from holding Target 2025 Fund or generate 2.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2025 vs. Target 2025 Fund
Performance |
| Timeline |
| American Funds 2025 |
| Target 2025 Fund |
American Funds and Target 2025 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Target 2025
The main advantage of trading using opposite American Funds and Target 2025 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Target 2025 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 Target 2025 will offset losses from the drop in Target 2025's long position.| American Funds vs. American Funds 2030 | American Funds vs. American Funds 2020 | American Funds vs. American Funds 2035 | American Funds vs. American Funds 2045 |
| Target 2025 vs. Mid Cap Value Profund | Target 2025 vs. Vanguard Small Cap Value | Target 2025 vs. Lord Abbett Small | Target 2025 vs. Amg River Road |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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