Correlation Between American Funds and Large Cap
Can any of the company-specific risk be diversified away by investing in both American Funds and Large Cap 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 Large Cap 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 Large Cap Value, you can compare the effects of market volatilities on American Funds and Large Cap 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 Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Large Cap.
Diversification Opportunities for American Funds and Large Cap
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Large is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of American Funds i.e., American Funds and Large Cap go up and down completely randomly.
Pair Corralation between American Funds and Large Cap
Assuming the 90 days horizon American Funds American is expected to generate 0.61 times more return on investment than Large Cap. However, American Funds American is 1.63 times less risky than Large Cap. It trades about 0.33 of its potential returns per unit of risk. Large Cap Value is currently generating about 0.09 per unit of risk. If you would invest 5,825 in American Funds American on September 4, 2024 and sell it today you would earn a total of 235.00 from holding American Funds American or generate 4.03% 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. Large Cap Value
Performance |
| Timeline |
| American Funds American |
| Large Cap Value |
American Funds and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Large Cap
The main advantage of trading using opposite American Funds and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| American Funds vs. Qs Growth Fund | American Funds vs. Semiconductor Ultrasector Profund | American Funds vs. Growth Strategy Fund | American Funds vs. T Rowe Price |
| Large Cap vs. Prudential Government Money | Large Cap vs. Ashmore Emerging Markets | Large Cap vs. Aig Government Money | Large Cap vs. Blackrock Exchange Portfolio |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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