Correlation Between American Funds and Green Century
Can any of the company-specific risk be diversified away by investing in both American Funds and Green Century 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 Green Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds American and Green Century Balanced, you can compare the effects of market volatilities on American Funds and Green Century 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 Green Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Green Century.
Diversification Opportunities for American Funds and Green Century
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Green is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Green Century Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Century Balanced 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 American are associated (or correlated) with Green Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Century Balanced has no effect on the direction of American Funds i.e., American Funds and Green Century go up and down completely randomly.
Pair Corralation between American Funds and Green Century
Assuming the 90 days horizon American Funds American is expected to generate 1.05 times more return on investment than Green Century. However, American Funds is 1.05 times more volatile than Green Century Balanced. It trades about 0.11 of its potential returns per unit of risk. Green Century Balanced is currently generating about 0.1 per unit of risk. If you would invest 3,283 in American Funds American on September 1, 2024 and sell it today you would earn a total of 395.00 from holding American Funds American or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds American vs. Green Century Balanced
Performance |
| Timeline |
| American Funds American |
| Green Century Balanced |
American Funds and Green Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Green Century
The main advantage of trading using opposite American Funds and Green Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Green Century 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 Green Century will offset losses from the drop in Green Century's long position.| American Funds vs. Calamos Dynamic Convertible | American Funds vs. Federated Ultrashort Bond | American Funds vs. Maryland Tax Free Bond | American Funds vs. Ambrus Core Bond |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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