Correlation Between American Funds and Pace Large
Can any of the company-specific risk be diversified away by investing in both American Funds and Pace 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 Pace Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2020 and Pace Large Growth, you can compare the effects of market volatilities on American Funds and Pace 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 Pace Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Pace Large.
Diversification Opportunities for American Funds and Pace Large
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Pace is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2020 and Pace Large Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Growth 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 2020 are associated (or correlated) with Pace Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Large Growth has no effect on the direction of American Funds i.e., American Funds and Pace Large go up and down completely randomly.
Pair Corralation between American Funds and Pace Large
Assuming the 90 days horizon American Funds is expected to generate 2.42 times less return on investment than Pace Large. But when comparing it to its historical volatility, American Funds 2020 is 1.91 times less risky than Pace Large. It trades about 0.09 of its potential returns per unit of risk. Pace Large Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,040 in Pace Large Growth on September 13, 2024 and sell it today you would earn a total of 768.00 from holding Pace Large Growth or generate 73.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2020 vs. Pace Large Growth
Performance |
| Timeline |
| American Funds 2020 |
| Pace Large Growth |
American Funds and Pace Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Pace Large
The main advantage of trading using opposite American Funds and Pace Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Pace 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 Pace Large will offset losses from the drop in Pace Large's long position.| American Funds vs. Redwood Real Estate | American Funds vs. Guggenheim Risk Managed | American Funds vs. Commonwealth Real Estate | American Funds vs. Jhancock Real Estate |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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