Correlation Between American Funds and Pacific Funds
Can any of the company-specific risk be diversified away by investing in both American Funds and Pacific Funds 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 Pacific Funds 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 Pacific Funds Short, you can compare the effects of market volatilities on American Funds and Pacific Funds 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 Pacific Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Pacific Funds.
Diversification Opportunities for American Funds and Pacific Funds
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Pacific is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Pacific Funds Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Short 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 Pacific Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Funds Short has no effect on the direction of American Funds i.e., American Funds and Pacific Funds go up and down completely randomly.
Pair Corralation between American Funds and Pacific Funds
Assuming the 90 days horizon American Funds Conservative is expected to generate 2.37 times more return on investment than Pacific Funds. However, American Funds is 2.37 times more volatile than Pacific Funds Short. It trades about 0.3 of its potential returns per unit of risk. Pacific Funds Short is currently generating about 0.11 per unit of risk. If you would invest 1,348 in American Funds Conservative on September 2, 2024 and sell it today you would earn a total of 27.00 from holding American Funds Conservative or generate 2.0% 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. Pacific Funds Short
Performance |
| Timeline |
| American Funds Conse |
| Pacific Funds Short |
American Funds and Pacific Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Pacific Funds
The main advantage of trading using opposite American Funds and Pacific Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Pacific Funds 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 Pacific Funds will offset losses from the drop in Pacific Funds' long position.| American Funds vs. Pace Large Growth | American Funds vs. Alternative Asset Allocation | American Funds vs. Old Westbury Large | American Funds vs. T Rowe Price |
| Pacific Funds vs. Nationwide Growth Fund | Pacific Funds vs. Champlain Mid Cap | Pacific Funds vs. Kinetics Small Cap | Pacific Funds vs. Tfa Alphagen Growth |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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