Correlation Between American Funds and Pace Intermediate
Can any of the company-specific risk be diversified away by investing in both American Funds and Pace Intermediate 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 Pace Intermediate 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 Pace Intermediate Fixed, you can compare the effects of market volatilities on American Funds and Pace Intermediate 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 Pace Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Pace Intermediate.
Diversification Opportunities for American Funds and Pace Intermediate
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Pace is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Pace Intermediate Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Intermediate Fixed 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 Pace Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Intermediate Fixed has no effect on the direction of American Funds i.e., American Funds and Pace Intermediate go up and down completely randomly.
Pair Corralation between American Funds and Pace Intermediate
Assuming the 90 days horizon American Funds is expected to generate 2.26 times less return on investment than Pace Intermediate. But when comparing it to its historical volatility, American Funds Inflation is 1.01 times less risky than Pace Intermediate. It trades about 0.03 of its potential returns per unit of risk. Pace Intermediate Fixed is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 962.00 in Pace Intermediate Fixed on August 31, 2024 and sell it today you would earn a total of 97.00 from holding Pace Intermediate Fixed or generate 10.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Inflation vs. Pace Intermediate Fixed
Performance |
| Timeline |
| American Funds Inflation |
| Pace Intermediate Fixed |
American Funds and Pace Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Pace Intermediate
The main advantage of trading using opposite American Funds and Pace Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Pace Intermediate 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 Pace Intermediate will offset losses from the drop in Pace Intermediate's long position.| American Funds vs. Vanguard Inflation Protected Securities | American Funds vs. Vanguard Inflation Protected Securities | American Funds vs. American Funds Inflation |
| Pace Intermediate vs. Ab Bond Inflation | Pace Intermediate vs. Lord Abbett Inflation | Pace Intermediate vs. American Funds Inflation | Pace Intermediate vs. Oklahoma College Savings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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