Correlation Between American Funds and Us Treasury
Can any of the company-specific risk be diversified away by investing in both American Funds and Us Treasury 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 Us Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Government and Us Treasury Intermediate, you can compare the effects of market volatilities on American Funds and Us Treasury 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 Us Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Us Treasury.
Diversification Opportunities for American Funds and Us Treasury
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and PRTIX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Government and Us Treasury Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Treasury Intermediate 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 Government are associated (or correlated) with Us Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Treasury Intermediate has no effect on the direction of American Funds i.e., American Funds and Us Treasury go up and down completely randomly.
Pair Corralation between American Funds and Us Treasury
Assuming the 90 days horizon American Funds Government is expected to under-perform the Us Treasury. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Government is 1.06 times less risky than Us Treasury. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Us Treasury Intermediate is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 516.00 in Us Treasury Intermediate on August 29, 2024 and sell it today you would lose (14.00) from holding Us Treasury Intermediate or give up 2.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 97.67% |
Values | Daily Returns |
American Funds Government vs. Us Treasury Intermediate
Performance |
Timeline |
American Funds Government |
Us Treasury Intermediate |
American Funds and Us Treasury Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and Us Treasury
The main advantage of trading using opposite American Funds and Us Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Us Treasury 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 Us Treasury will offset losses from the drop in Us Treasury's long position.American Funds vs. Us Government Securities | American Funds vs. Vanguard Mortgage Backed Securities | American Funds vs. Vanguard Gnma Fund | American Funds vs. Fidelity Sai Treasury |
Us Treasury vs. Us Government Securities | Us Treasury vs. American Funds Government | Us Treasury vs. Vanguard Mortgage Backed Securities | Us Treasury vs. Vanguard Gnma Fund |
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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