Correlation Between American Funds and Asset Allocation
Can any of the company-specific risk be diversified away by investing in both American Funds and Asset Allocation 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 Asset Allocation 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 Asset Allocation Fund, you can compare the effects of market volatilities on American Funds and Asset Allocation 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 Asset Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Asset Allocation.
Diversification Opportunities for American Funds and Asset Allocation
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Asset is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Asset Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asset Allocation 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 Asset Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asset Allocation has no effect on the direction of American Funds i.e., American Funds and Asset Allocation go up and down completely randomly.
Pair Corralation between American Funds and Asset Allocation
Assuming the 90 days horizon American Funds is expected to generate 1.28 times less return on investment than Asset Allocation. But when comparing it to its historical volatility, American Funds American is 1.11 times less risky than Asset Allocation. It trades about 0.08 of its potential returns per unit of risk. Asset Allocation Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,227 in Asset Allocation Fund on August 27, 2024 and sell it today you would earn a total of 13.00 from holding Asset Allocation Fund or generate 1.06% 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 American vs. Asset Allocation Fund
Performance |
| Timeline |
| American Funds American |
| Asset Allocation |
American Funds and Asset Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Asset Allocation
The main advantage of trading using opposite American Funds and Asset Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Asset Allocation 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 Asset Allocation will offset losses from the drop in Asset Allocation's long position.| American Funds vs. T Rowe Price | American Funds vs. Doubleline Emerging Markets | American Funds vs. Pnc Emerging Markets | American Funds vs. Rbc Emerging Markets |
| Asset Allocation vs. Mid Cap Index | Asset Allocation vs. Mid Cap Strategic | Asset Allocation vs. Valic Company I | Asset Allocation vs. Valic Company I |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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