Correlation Between American Funds and Short Duration
Can any of the company-specific risk be diversified away by investing in both American Funds and Short Duration 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 Short Duration 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 Short Duration Inflation, you can compare the effects of market volatilities on American Funds and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Short Duration.
Diversification Opportunities for American Funds and Short Duration
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Short is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Short Duration Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Inflation 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Inflation has no effect on the direction of American Funds i.e., American Funds and Short Duration go up and down completely randomly.
Pair Corralation between American Funds and Short Duration
Assuming the 90 days horizon American Funds Inflation is expected to generate 2.07 times more return on investment than Short Duration. However, American Funds is 2.07 times more volatile than Short Duration Inflation. It trades about 0.13 of its potential returns per unit of risk. Short Duration Inflation is currently generating about 0.25 per unit of risk. If you would invest 937.00 in American Funds Inflation on September 4, 2024 and sell it today you would earn a total of 6.00 from holding American Funds Inflation or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Inflation vs. Short Duration Inflation
Performance |
| Timeline |
| American Funds Inflation |
| Short Duration Inflation |
American Funds and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Short Duration
The main advantage of trading using opposite American Funds and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.| American Funds vs. Bbh Intermediate Municipal | American Funds vs. Bbh Intermediate Municipal | American Funds vs. Blrc Sgy Mnp | American Funds vs. Federated Pennsylvania Municipal |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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