Correlation Between American Funds and Inverse Sp
Can any of the company-specific risk be diversified away by investing in both American Funds and Inverse Sp 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 Inverse Sp 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 Inverse Sp 500, you can compare the effects of market volatilities on American Funds and Inverse Sp 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 Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Inverse Sp.
Diversification Opportunities for American Funds and Inverse Sp
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Inverse is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 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 Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of American Funds i.e., American Funds and Inverse Sp go up and down completely randomly.
Pair Corralation between American Funds and Inverse Sp
Assuming the 90 days horizon American Funds is expected to generate 486.13 times less return on investment than Inverse Sp. But when comparing it to its historical volatility, American Funds Conservative is 420.06 times less risky than Inverse Sp. It trades about 0.24 of its potential returns per unit of risk. Inverse Sp 500 is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,944 in Inverse Sp 500 on November 29, 2024 and sell it today you would earn a total of 8,002 from holding Inverse Sp 500 or generate 411.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Conservative vs. Inverse Sp 500
Performance |
| Timeline |
| American Funds Conse |
| Inverse Sp 500 |
American Funds and Inverse Sp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Inverse Sp
The main advantage of trading using opposite American Funds and Inverse Sp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Inverse Sp 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 Inverse Sp will offset losses from the drop in Inverse Sp's long position.| American Funds vs. Calvert Large Cap | American Funds vs. Blackrock Large Cap | American Funds vs. Wasatch Large Cap | American Funds vs. Touchstone Large Cap |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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