Correlation Between American Funds and Eafe Choice
Can any of the company-specific risk be diversified away by investing in both American Funds and Eafe Choice 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 Eafe Choice 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 The Eafe Choice, you can compare the effects of market volatilities on American Funds and Eafe Choice 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 Eafe Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Eafe Choice.
Diversification Opportunities for American Funds and Eafe Choice
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Eafe is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and The Eafe Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Choice 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 Eafe Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Choice has no effect on the direction of American Funds i.e., American Funds and Eafe Choice go up and down completely randomly.
Pair Corralation between American Funds and Eafe Choice
Assuming the 90 days horizon American Funds Inflation is expected to generate 0.38 times more return on investment than Eafe Choice. However, American Funds Inflation is 2.64 times less risky than Eafe Choice. It trades about 0.04 of its potential returns per unit of risk. The Eafe Choice is currently generating about 0.01 per unit of risk. If you would invest 898.00 in American Funds Inflation on September 12, 2024 and sell it today you would earn a total of 46.00 from holding American Funds Inflation or generate 5.12% 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. The Eafe Choice
Performance |
| Timeline |
| American Funds Inflation |
| Eafe Choice |
American Funds and Eafe Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Eafe Choice
The main advantage of trading using opposite American Funds and Eafe Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Eafe Choice 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 Eafe Choice will offset losses from the drop in Eafe Choice's long position.| American Funds vs. Vanguard Inflation Protected Securities | American Funds vs. Vanguard Inflation Protected Securities | American Funds vs. American Funds Inflation |
| Eafe Choice vs. Europacific Growth Fund | Eafe Choice vs. SCOR PK | Eafe Choice vs. Morningstar Unconstrained Allocation | Eafe Choice vs. Thrivent 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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