Correlation Between American Funds and Frost Kempner
Can any of the company-specific risk be diversified away by investing in both American Funds and Frost Kempner 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 Frost Kempner 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 Frost Kempner Multi Cap, you can compare the effects of market volatilities on American Funds and Frost Kempner 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 Frost Kempner. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Frost Kempner.
Diversification Opportunities for American Funds and Frost Kempner
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Frost is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Frost Kempner Multi Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Kempner Multi 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 Frost Kempner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Kempner Multi has no effect on the direction of American Funds i.e., American Funds and Frost Kempner go up and down completely randomly.
Pair Corralation between American Funds and Frost Kempner
Assuming the 90 days horizon American Funds is expected to generate 1.0 times less return on investment than Frost Kempner. But when comparing it to its historical volatility, American Funds American is 1.22 times less risky than Frost Kempner. It trades about 0.27 of its potential returns per unit of risk. Frost Kempner Multi Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,229 in Frost Kempner Multi Cap on September 1, 2024 and sell it today you would earn a total of 43.00 from holding Frost Kempner Multi Cap or generate 3.5% 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. Frost Kempner Multi Cap
Performance |
| Timeline |
| American Funds American |
| Frost Kempner Multi |
American Funds and Frost Kempner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Frost Kempner
The main advantage of trading using opposite American Funds and Frost Kempner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Frost Kempner 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 Frost Kempner will offset losses from the drop in Frost Kempner's long position.| American Funds vs. Gmo High Yield | American Funds vs. Blackrock High Yield | American Funds vs. Virtus High Yield | American Funds vs. Pioneer High Yield |
| Frost Kempner vs. Frost Growth Equity | Frost Kempner vs. Frost Low Duration | Frost Kempner vs. Frost Total Return | Frost Kempner 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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