Correlation Between American Funds and Stet California
Can any of the company-specific risk be diversified away by investing in both American Funds and Stet California 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 Stet California 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 Stet California Municipal, you can compare the effects of market volatilities on American Funds and Stet California 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 Stet California. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Stet California.
Diversification Opportunities for American Funds and Stet California
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Stet is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Stet California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet California Municipal 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 Stet California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet California Municipal has no effect on the direction of American Funds i.e., American Funds and Stet California go up and down completely randomly.
Pair Corralation between American Funds and Stet California
Assuming the 90 days horizon American Funds Conservative is expected to generate 1.89 times more return on investment than Stet California. However, American Funds is 1.89 times more volatile than Stet California Municipal. It trades about 0.2 of its potential returns per unit of risk. Stet California Municipal is currently generating about 0.28 per unit of risk. If you would invest 1,342 in American Funds Conservative on November 27, 2024 and sell it today you would earn a total of 16.00 from holding American Funds Conservative or generate 1.19% 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. Stet California Municipal
Performance |
| Timeline |
| American Funds Conse |
| Stet California Municipal |
American Funds and Stet California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Stet California
The main advantage of trading using opposite American Funds and Stet California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Stet California 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 Stet California will offset losses from the drop in Stet California's long position.| American Funds vs. Doubleline Global Bond | American Funds vs. Alliancebernstein Global Highome | American Funds vs. Gmo Global Equity | American Funds vs. Dreyfusstandish Global Fixed |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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