Correlation Between American Funds and Federated Equity
Can any of the company-specific risk be diversified away by investing in both American Funds and Federated Equity 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 Federated Equity 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 Federated Equity Income, you can compare the effects of market volatilities on American Funds and Federated Equity 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 Federated Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Federated Equity.
Diversification Opportunities for American Funds and Federated Equity
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Federated is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Federated Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Equity Income 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 Federated Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Equity Income has no effect on the direction of American Funds i.e., American Funds and Federated Equity go up and down completely randomly.
Pair Corralation between American Funds and Federated Equity
Assuming the 90 days horizon American Funds American is expected to generate 0.83 times more return on investment than Federated Equity. However, American Funds American is 1.21 times less risky than Federated Equity. It trades about 0.13 of its potential returns per unit of risk. Federated Equity Income is currently generating about 0.1 per unit of risk. If you would invest 4,715 in American Funds American on September 12, 2024 and sell it today you would earn a total of 1,244 from holding American Funds American or generate 26.38% 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. Federated Equity Income
Performance |
| Timeline |
| American Funds American |
| Federated Equity Income |
American Funds and Federated Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Federated Equity
The main advantage of trading using opposite American Funds and Federated Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Federated Equity 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 Federated Equity will offset losses from the drop in Federated Equity's long position.| American Funds vs. Century Small Cap | American Funds vs. Ab Value Fund | American Funds vs. Volumetric Fund Volumetric | American Funds vs. T Rowe Price |
| Federated Equity vs. Vanguard Value Index | Federated Equity vs. Dodge Cox Stock | Federated Equity vs. American Mutual Fund | Federated Equity vs. American Funds American |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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