Correlation Between American Funds and Commonwealth Global
Can any of the company-specific risk be diversified away by investing in both American Funds and Commonwealth Global 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 Commonwealth Global 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 Commonwealth Global Fund, you can compare the effects of market volatilities on American Funds and Commonwealth Global 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 Commonwealth Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Commonwealth Global.
Diversification Opportunities for American Funds and Commonwealth Global
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Commonwealth is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2045 and Commonwealth Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Global 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 Commonwealth Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Global has no effect on the direction of American Funds i.e., American Funds and Commonwealth Global go up and down completely randomly.
Pair Corralation between American Funds and Commonwealth Global
Assuming the 90 days horizon American Funds is expected to generate 1.1 times less return on investment than Commonwealth Global. But when comparing it to its historical volatility, American Funds 2045 is 1.19 times less risky than Commonwealth Global. It trades about 0.13 of its potential returns per unit of risk. Commonwealth Global Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,141 in Commonwealth Global Fund on September 13, 2024 and sell it today you would earn a total of 31.00 from holding Commonwealth Global Fund or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2045 vs. Commonwealth Global Fund
Performance |
| Timeline |
| American Funds 2045 |
| Commonwealth Global |
American Funds and Commonwealth Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Commonwealth Global
The main advantage of trading using opposite American Funds and Commonwealth Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Commonwealth Global 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 Commonwealth Global will offset losses from the drop in Commonwealth Global's long position.| American Funds vs. Angel Oak Multi Strategy | American Funds vs. Pnc Emerging Markets | American Funds vs. Mid Cap 15x Strategy | American Funds vs. Origin Emerging Markets |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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