Correlation Between American Funds and Global Alpha
Can any of the company-specific risk be diversified away by investing in both American Funds and Global Alpha 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 Global Alpha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds New and The Global Alpha, you can compare the effects of market volatilities on American Funds and Global Alpha 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 Global Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Global Alpha.
Diversification Opportunities for American Funds and Global Alpha
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and The Global Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Alpha 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 New are associated (or correlated) with Global Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Alpha has no effect on the direction of American Funds i.e., American Funds and Global Alpha go up and down completely randomly.
Pair Corralation between American Funds and Global Alpha
Assuming the 90 days horizon American Funds is expected to generate 1.15 times less return on investment than Global Alpha. But when comparing it to its historical volatility, American Funds New is 2.46 times less risky than Global Alpha. It trades about 0.15 of its potential returns per unit of risk. The Global Alpha is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,845 in The Global Alpha on September 13, 2024 and sell it today you would earn a total of 33.00 from holding The Global Alpha or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds New vs. The Global Alpha
Performance |
| Timeline |
| American Funds New |
| Global Alpha |
American Funds and Global Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Global Alpha
The main advantage of trading using opposite American Funds and Global Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Global Alpha 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 Global Alpha will offset losses from the drop in Global Alpha'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 |
| Global Alpha vs. Alpine High Yield | Global Alpha vs. Strategic Advisers Income | Global Alpha vs. Pax High Yield | Global Alpha vs. Jpmorgan High Yield |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |