Correlation Between American Funds and Inflation-adjusted
Can any of the company-specific risk be diversified away by investing in both American Funds and Inflation-adjusted 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 Inflation-adjusted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Inflation and Inflation Adjusted Bond Fund, you can compare the effects of market volatilities on American Funds and Inflation-adjusted 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 Inflation-adjusted. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Inflation-adjusted.
Diversification Opportunities for American Funds and Inflation-adjusted
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Inflation-adjusted is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Inflation Adjusted Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Adjusted Bond 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 Inflation are associated (or correlated) with Inflation-adjusted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Adjusted Bond has no effect on the direction of American Funds i.e., American Funds and Inflation-adjusted go up and down completely randomly.
Pair Corralation between American Funds and Inflation-adjusted
Assuming the 90 days horizon American Funds is expected to generate 1.19 times less return on investment than Inflation-adjusted. In addition to that, American Funds is 1.08 times more volatile than Inflation Adjusted Bond Fund. It trades about 0.07 of its total potential returns per unit of risk. Inflation Adjusted Bond Fund is currently generating about 0.09 per unit of volatility. If you would invest 992.00 in Inflation Adjusted Bond Fund on September 1, 2024 and sell it today you would earn a total of 79.00 from holding Inflation Adjusted Bond Fund or generate 7.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Funds Inflation vs. Inflation Adjusted Bond Fund
Performance |
| Timeline |
| American Funds Inflation |
| Inflation Adjusted Bond |
American Funds and Inflation-adjusted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Inflation-adjusted
The main advantage of trading using opposite American Funds and Inflation-adjusted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Inflation-adjusted 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 Inflation-adjusted will offset losses from the drop in Inflation-adjusted's long position.| American Funds vs. Pace Large Growth | American Funds vs. Legg Mason Bw | American Funds vs. Tax Managed Large Cap | American Funds vs. Strategic Allocation Aggressive |
| Inflation-adjusted vs. Heartland Value Plus | Inflation-adjusted vs. Victory Rs Partners | Inflation-adjusted vs. Columbia Small Cap | Inflation-adjusted vs. Fpa Queens Road |
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.
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