Correlation Between American Funds and National Tax
Can any of the company-specific risk be diversified away by investing in both American Funds and National Tax 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 National Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2045 and The National Tax Free, you can compare the effects of market volatilities on American Funds and National Tax 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 National Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and National Tax.
Diversification Opportunities for American Funds and National Tax
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2045 and The National Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Tax 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 2045 are associated (or correlated) with National Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Tax has no effect on the direction of American Funds i.e., American Funds and National Tax go up and down completely randomly.
Pair Corralation between American Funds and National Tax
Assuming the 90 days horizon American Funds is expected to generate 2.25 times less return on investment than National Tax. In addition to that, American Funds is 5.56 times more volatile than The National Tax Free. It trades about 0.05 of its total potential returns per unit of risk. The National Tax Free is currently generating about 0.6 per unit of volatility. If you would invest 1,863 in The National Tax Free on September 12, 2024 and sell it today you would earn a total of 21.00 from holding The National Tax Free or generate 1.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds 2045 vs. The National Tax Free
Performance |
| Timeline |
| American Funds 2045 |
| National Tax |
American Funds and National Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and National Tax
The main advantage of trading using opposite American Funds and National Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, National Tax 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 National Tax will offset losses from the drop in National Tax's long position.| American Funds vs. Commonwealth Global Fund | American Funds vs. Scharf Global Opportunity | American Funds vs. Investec Global Franchise | American Funds vs. Franklin Mutual Global |
| National Tax vs. Tax Exempt Bond | National Tax vs. Blackrock National Municipal | National Tax vs. SCOR PK | National Tax vs. Morningstar Unconstrained Allocation |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |