Correlation Between American Funds and Towpath Focus
Can any of the company-specific risk be diversified away by investing in both American Funds and Towpath Focus 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 Towpath Focus 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 Towpath Focus, you can compare the effects of market volatilities on American Funds and Towpath Focus 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 Towpath Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Towpath Focus.
Diversification Opportunities for American Funds and Towpath Focus
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Towpath is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Towpath Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towpath Focus 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 Towpath Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towpath Focus has no effect on the direction of American Funds i.e., American Funds and Towpath Focus go up and down completely randomly.
Pair Corralation between American Funds and Towpath Focus
Assuming the 90 days horizon American Funds is expected to generate 1.2 times less return on investment than Towpath Focus. But when comparing it to its historical volatility, American Funds American is 1.08 times less risky than Towpath Focus. It trades about 0.24 of its potential returns per unit of risk. Towpath Focus is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,550 in Towpath Focus on September 1, 2024 and sell it today you would earn a total of 61.00 from holding Towpath Focus or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds American vs. Towpath Focus
Performance |
| Timeline |
| American Funds American |
| Towpath Focus |
American Funds and Towpath Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Towpath Focus
The main advantage of trading using opposite American Funds and Towpath Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Towpath Focus 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 Towpath Focus will offset losses from the drop in Towpath Focus' 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 |
| Towpath Focus vs. Towpath Technology | Towpath Focus vs. Pimco Income Strategy | Towpath Focus vs. Growth Fund Of | Towpath Focus vs. Westwood Largecap Value |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |