Correlation Between American Funds and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both American Funds and Aggressive 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 Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Growth and Aggressive Growth Allocation, you can compare the effects of market volatilities on American Funds and Aggressive 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Aggressive Growth.
Diversification Opportunities for American Funds and Aggressive Growth
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Aggressive is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Growth and Aggressive Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive 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 Growth are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of American Funds i.e., American Funds and Aggressive Growth go up and down completely randomly.
Pair Corralation between American Funds and Aggressive Growth
Assuming the 90 days horizon American Funds Growth is expected to generate 1.3 times more return on investment than Aggressive Growth. However, American Funds is 1.3 times more volatile than Aggressive Growth Allocation. It trades about 0.1 of its potential returns per unit of risk. Aggressive Growth Allocation is currently generating about 0.1 per unit of risk. If you would invest 1,800 in American Funds Growth on September 4, 2024 and sell it today you would earn a total of 946.00 from holding American Funds Growth or generate 52.56% 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 Growth vs. Aggressive Growth Allocation
Performance |
| Timeline |
| American Funds Growth |
| Aggressive Growth |
American Funds and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Aggressive Growth
The main advantage of trading using opposite American Funds and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Aggressive 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| American Funds vs. Pioneer High Yield | American Funds vs. Western Asset High | American Funds vs. Ab High Income | American Funds vs. Guggenheim High Yield |
| Aggressive Growth vs. Jpmorgan Equity Income | Aggressive Growth vs. Scharf Fund Retail | Aggressive Growth vs. Ultra Short Fixed Income | Aggressive Growth vs. The Fixed Income |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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