Correlation Between American Funds and Ab International
Can any of the company-specific risk be diversified away by investing in both American Funds and Ab International 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 Ab International 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 Ab International Growth, you can compare the effects of market volatilities on American Funds and Ab International 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 Ab International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Ab International.
Diversification Opportunities for American Funds and Ab International
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and AWPIX is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Ab International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab International Growth 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 Ab International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab International Growth has no effect on the direction of American Funds i.e., American Funds and Ab International go up and down completely randomly.
Pair Corralation between American Funds and Ab International
Assuming the 90 days horizon American Funds Inflation is expected to generate 0.29 times more return on investment than Ab International. However, American Funds Inflation is 3.44 times less risky than Ab International. It trades about -0.02 of its potential returns per unit of risk. Ab International Growth is currently generating about -0.11 per unit of risk. If you would invest 941.00 in American Funds Inflation on August 31, 2024 and sell it today you would lose (1.00) from holding American Funds Inflation or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Inflation vs. Ab International Growth
Performance |
| Timeline |
| American Funds Inflation |
| Ab International Growth |
American Funds and Ab International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Ab International
The main advantage of trading using opposite American Funds and Ab International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Ab International 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 Ab International will offset losses from the drop in Ab International's long position.The idea behind American Funds Inflation and Ab International Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Ab International vs. American Funds Inflation | Ab International vs. Blackrock Inflation Protected | Ab International vs. Cref Inflation Linked Bond | Ab International vs. Ab Bond Inflation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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