Correlation Between American Funds and Us Large
Can any of the company-specific risk be diversified away by investing in both American Funds and Us 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 Us Large 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 Us Large Cap, you can compare the effects of market volatilities on American Funds and Us 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 Us Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Us Large.
Diversification Opportunities for American Funds and Us Large
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and DFLVX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Us Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us 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 American are associated (or correlated) with Us Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Large Cap has no effect on the direction of American Funds i.e., American Funds and Us Large go up and down completely randomly.
Pair Corralation between American Funds and Us Large
Assuming the 90 days horizon American Funds is expected to generate 1.92 times less return on investment than Us Large. But when comparing it to its historical volatility, American Funds American is 1.64 times less risky than Us Large. It trades about 0.24 of its potential returns per unit of risk. Us Large Cap is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,032 in Us Large Cap on September 1, 2024 and sell it today you would earn a total of 304.00 from holding Us Large Cap or generate 6.04% 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. Us Large Cap
Performance |
| Timeline |
| American Funds American |
| Us Large Cap |
American Funds and Us Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Us Large
The main advantage of trading using opposite American Funds and Us Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Us 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 Us Large will offset losses from the drop in Us Large's long position.| American Funds vs. Vanguard Developed Markets | American Funds vs. Pnc Emerging Markets | American Funds vs. Transamerica Emerging Markets | American Funds vs. Ep Emerging Markets |
| Us Large vs. Dfa International Value | Us Large vs. Dfa International Small | Us Large vs. Us Small Cap | Us Large vs. Dfa Real Estate |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |