Correlation Between American Funds and Kensington Active
Can any of the company-specific risk be diversified away by investing in both American Funds and Kensington Active 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 Kensington Active 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 Kensington Active Advantage, you can compare the effects of market volatilities on American Funds and Kensington Active 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 Kensington Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Kensington Active.
Diversification Opportunities for American Funds and Kensington Active
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Kensington is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Kensington Active Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Active 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 Kensington Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Active has no effect on the direction of American Funds i.e., American Funds and Kensington Active go up and down completely randomly.
Pair Corralation between American Funds and Kensington Active
Assuming the 90 days horizon American Funds Conservative is expected to generate 0.92 times more return on investment than Kensington Active. However, American Funds Conservative is 1.09 times less risky than Kensington Active. It trades about 0.12 of its potential returns per unit of risk. Kensington Active Advantage is currently generating about 0.1 per unit of risk. If you would invest 1,156 in American Funds Conservative on September 12, 2024 and sell it today you would earn a total of 217.00 from holding American Funds Conservative or generate 18.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Conservative vs. Kensington Active Advantage
Performance |
| Timeline |
| American Funds Conse |
| Kensington Active |
American Funds and Kensington Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Kensington Active
The main advantage of trading using opposite American Funds and Kensington Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Kensington Active 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 Kensington Active will offset losses from the drop in Kensington Active's long position.| American Funds vs. Sp Smallcap 600 | American Funds vs. Ab Small Cap | American Funds vs. Vy Columbia Small | American Funds vs. Guidemark Smallmid Cap |
| Kensington Active vs. Touchstone Premium Yield | Kensington Active vs. California Bond Fund | Kensington Active vs. The National Tax Free | Kensington Active vs. Franklin 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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