Correlation Between American Funds and Teton Westwood
Can any of the company-specific risk be diversified away by investing in both American Funds and Teton Westwood 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 Teton Westwood 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 Teton Westwood Equity, you can compare the effects of market volatilities on American Funds and Teton Westwood 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 Teton Westwood. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Teton Westwood.
Diversification Opportunities for American Funds and Teton Westwood
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Teton is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Teton Westwood Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Westwood Equity 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 Teton Westwood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Westwood Equity has no effect on the direction of American Funds i.e., American Funds and Teton Westwood go up and down completely randomly.
Pair Corralation between American Funds and Teton Westwood
Assuming the 90 days horizon American Funds is expected to generate 3.35 times less return on investment than Teton Westwood. But when comparing it to its historical volatility, American Funds American is 1.44 times less risky than Teton Westwood. It trades about 0.09 of its potential returns per unit of risk. Teton Westwood Equity is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,214 in Teton Westwood Equity on August 28, 2024 and sell it today you would earn a total of 50.00 from holding Teton Westwood Equity or generate 4.12% 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. Teton Westwood Equity
Performance |
| Timeline |
| American Funds American |
| Teton Westwood Equity |
American Funds and Teton Westwood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Teton Westwood
The main advantage of trading using opposite American Funds and Teton Westwood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Teton Westwood 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 Teton Westwood will offset losses from the drop in Teton Westwood'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 |
| Teton Westwood vs. Teton Westwood Balanced | Teton Westwood vs. Teton Westwood Small | Teton Westwood vs. The Gabelli Asset | Teton Westwood vs. Teton Westwood Mighty |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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