Correlation Between American Funds and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both American Funds and Strategic 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 Strategic Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds The and Strategic Allocation Aggressive, you can compare the effects of market volatilities on American Funds and Strategic 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 Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Strategic Allocation.
Diversification Opportunities for American Funds and Strategic Allocation
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Strategic is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Strategic Allocation Aggressiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic 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 The are associated (or correlated) with Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of American Funds i.e., American Funds and Strategic Allocation go up and down completely randomly.
Pair Corralation between American Funds and Strategic Allocation
Assuming the 90 days horizon American Funds The is expected to generate 0.74 times more return on investment than Strategic Allocation. However, American Funds The is 1.35 times less risky than Strategic Allocation. It trades about 0.27 of its potential returns per unit of risk. Strategic Allocation Aggressive is currently generating about -0.04 per unit of risk. If you would invest 2,516 in American Funds The on November 29, 2024 and sell it today you would earn a total of 54.00 from holding American Funds The or generate 2.15% 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 The vs. Strategic Allocation Aggressiv
Performance |
| Timeline |
| American Funds |
| Strategic Allocation |
American Funds and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Strategic Allocation
The main advantage of trading using opposite American Funds and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Strategic 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 Strategic Allocation will offset losses from the drop in Strategic Allocation's long position.| American Funds vs. T Rowe Price | American Funds vs. Prudential California Muni | American Funds vs. Alpine Ultra Short | American Funds vs. Pace Municipal Fixed |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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