Correlation Between American Funds and Vela Large
Can any of the company-specific risk be diversified away by investing in both American Funds and Vela Large 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 Vela Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2065 and Vela Large Cap, you can compare the effects of market volatilities on American Funds and Vela Large 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 Vela Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Vela Large.
Diversification Opportunities for American Funds and Vela Large
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Vela is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2065 and Vela Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Large Cap 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 2065 are associated (or correlated) with Vela Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Large Cap has no effect on the direction of American Funds i.e., American Funds and Vela Large go up and down completely randomly.
Pair Corralation between American Funds and Vela Large
Assuming the 90 days horizon American Funds 2065 is expected to generate 1.31 times more return on investment than Vela Large. However, American Funds is 1.31 times more volatile than Vela Large Cap. It trades about 0.11 of its potential returns per unit of risk. Vela Large Cap is currently generating about 0.13 per unit of risk. If you would invest 1,377 in American Funds 2065 on August 31, 2024 and sell it today you would earn a total of 447.00 from holding American Funds 2065 or generate 32.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2065 vs. Vela Large Cap
Performance |
| Timeline |
| American Funds 2065 |
| Vela Large Cap |
American Funds and Vela Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Vela Large
The main advantage of trading using opposite American Funds and Vela Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Vela Large 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 Vela Large will offset losses from the drop in Vela Large's long position.| American Funds vs. Prudential Core Conservative | American Funds vs. Evaluator Conservative Rms | American Funds vs. Fidelity Advisor Diversified | American Funds vs. Oppenheimer International Diversified |
| Vela Large vs. Ab Bond Inflation | Vela Large vs. Bbh Intermediate Municipal | Vela Large vs. Blrc Sgy Mnp | Vela Large vs. Multisector Bond Sma |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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