Correlation Between American Funds and Mairs Power
Can any of the company-specific risk be diversified away by investing in both American Funds and Mairs Power 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 Mairs Power 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 Mairs Power Balanced, you can compare the effects of market volatilities on American Funds and Mairs Power 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 Mairs Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Mairs Power.
Diversification Opportunities for American Funds and Mairs Power
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Mairs is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Mairs Power Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mairs Power 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 Mairs Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mairs Power Balanced has no effect on the direction of American Funds i.e., American Funds and Mairs Power go up and down completely randomly.
Pair Corralation between American Funds and Mairs Power
Assuming the 90 days horizon American Funds American is expected to generate 1.11 times more return on investment than Mairs Power. However, American Funds is 1.11 times more volatile than Mairs Power Balanced. It trades about 0.14 of its potential returns per unit of risk. Mairs Power Balanced is currently generating about 0.14 per unit of risk. If you would invest 3,348 in American Funds American on August 29, 2024 and sell it today you would earn a total of 330.00 from holding American Funds American or generate 9.86% 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. Mairs Power Balanced
Performance |
| Timeline |
| American Funds American |
| Mairs Power Balanced |
American Funds and Mairs Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Mairs Power
The main advantage of trading using opposite American Funds and Mairs Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Mairs Power 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 Mairs Power will offset losses from the drop in Mairs Power's long position.| American Funds vs. American Balanced | American Funds vs. American Balanced Fund | American Funds vs. American Balanced Fund | American Funds vs. American Balanced Fund |
| Mairs Power vs. American Balanced Fund | Mairs Power vs. American Balanced Fund | Mairs Power vs. HUMANA INC | Mairs Power vs. Aquagold International |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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