Correlation Between American Funds and Union Street
Can any of the company-specific risk be diversified away by investing in both American Funds and Union Street 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 Union Street 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 Union Street Partners, you can compare the effects of market volatilities on American Funds and Union Street 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 Union Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Union Street.
Diversification Opportunities for American Funds and Union Street
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Union is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Union Street Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Street Partners 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 Union Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Street Partners has no effect on the direction of American Funds i.e., American Funds and Union Street go up and down completely randomly.
Pair Corralation between American Funds and Union Street
Assuming the 90 days horizon American Funds is expected to generate 1.32 times less return on investment than Union Street. But when comparing it to its historical volatility, American Funds American is 1.11 times less risky than Union Street. It trades about 0.09 of its potential returns per unit of risk. Union Street Partners is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,894 in Union Street Partners on August 27, 2024 and sell it today you would earn a total of 46.00 from holding Union Street Partners or generate 1.59% 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. Union Street Partners
Performance |
| Timeline |
| American Funds American |
| Union Street Partners |
American Funds and Union Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Union Street
The main advantage of trading using opposite American Funds and Union Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Union Street 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 Union Street will offset losses from the drop in Union Street's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Union Street vs. Ips Strategic Capital | Union Street vs. Volumetric Fund Volumetric | Union Street vs. Ab Value Fund | Union Street vs. Archer Balanced Fund |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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