Correlation Between American Funds and Ab Municipal
Can any of the company-specific risk be diversified away by investing in both American Funds and Ab Municipal 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 Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Conservative and Ab Municipal Bond, you can compare the effects of market volatilities on American Funds and Ab Municipal 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 Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Ab Municipal.
Diversification Opportunities for American Funds and Ab Municipal
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and AUNYX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Ab Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Municipal Bond 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 Conservative are associated (or correlated) with Ab Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Municipal Bond has no effect on the direction of American Funds i.e., American Funds and Ab Municipal go up and down completely randomly.
Pair Corralation between American Funds and Ab Municipal
Assuming the 90 days horizon American Funds Conservative is expected to generate 2.23 times more return on investment than Ab Municipal. However, American Funds is 2.23 times more volatile than Ab Municipal Bond. It trades about 0.3 of its potential returns per unit of risk. Ab Municipal Bond is currently generating about 0.19 per unit of risk. If you would invest 1,349 in American Funds Conservative on September 3, 2024 and sell it today you would earn a total of 26.00 from holding American Funds Conservative or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Conservative vs. Ab Municipal Bond
Performance |
| Timeline |
| American Funds Conse |
| Ab Municipal Bond |
American Funds and Ab Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Ab Municipal
The main advantage of trading using opposite American Funds and Ab Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Ab Municipal 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 Municipal will offset losses from the drop in Ab Municipal's long position.| American Funds vs. Janus Global Technology | American Funds vs. Pgim Jennison Technology | American Funds vs. Technology Ultrasector Profund | American Funds vs. Towpath Technology |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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