Correlation Between American Funds and Smallcap Growth
Can any of the company-specific risk be diversified away by investing in both American Funds and Smallcap Growth 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 Smallcap Growth 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 Smallcap Growth Fund, you can compare the effects of market volatilities on American Funds and Smallcap Growth 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 Smallcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Smallcap Growth.
Diversification Opportunities for American Funds and Smallcap Growth
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Smallcap is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap 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 Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of American Funds i.e., American Funds and Smallcap Growth go up and down completely randomly.
Pair Corralation between American Funds and Smallcap Growth
Assuming the 90 days horizon American Funds is expected to generate 6.49 times less return on investment than Smallcap Growth. But when comparing it to its historical volatility, American Funds Inflation is 3.19 times less risky than Smallcap Growth. It trades about 0.03 of its potential returns per unit of risk. Smallcap Growth Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,336 in Smallcap Growth Fund on August 31, 2024 and sell it today you would earn a total of 393.00 from holding Smallcap Growth Fund or generate 29.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
American Funds Inflation vs. Smallcap Growth Fund
Performance |
| Timeline |
| American Funds Inflation |
| Smallcap Growth |
American Funds and Smallcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Smallcap Growth
The main advantage of trading using opposite American Funds and Smallcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Smallcap Growth 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 Smallcap Growth will offset losses from the drop in Smallcap Growth's long position.| American Funds vs. Vanguard Inflation Protected Securities | American Funds vs. Vanguard Inflation Protected Securities | American Funds vs. American Funds Inflation |
| Smallcap Growth vs. Western Asset Inflation | Smallcap Growth vs. American Funds Inflation | Smallcap Growth vs. Blackrock Inflation Protected | Smallcap Growth vs. Fidelity Advisor 529 |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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