Correlation Between American Funds and Us Government
Can any of the company-specific risk be diversified away by investing in both American Funds and Us Government 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 Government 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 Government Securities, you can compare the effects of market volatilities on American Funds and Us Government 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 Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Us Government.
Diversification Opportunities for American Funds and Us Government
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and RGVJX is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Government and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities 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 Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of American Funds i.e., American Funds and Us Government go up and down completely randomly.
Pair Corralation between American Funds and Us Government
Assuming the 90 days horizon American Funds Government is expected to under-perform the Us Government. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Government is 1.01 times less risky than Us Government. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Us Government Securities is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,212 in Us Government Securities on September 2, 2024 and sell it today you would lose (18.00) from holding Us Government Securities or give up 1.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Government vs. Us Government Securities
Performance |
| Timeline |
| American Funds Government |
| Us Government Securities |
American Funds and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Us Government
The main advantage of trading using opposite American Funds and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Us Government 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 Government will offset losses from the drop in Us Government's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Us Government vs. Barings Global Floating | Us Government vs. Wasatch Global Opportunities | Us Government vs. Dreyfusstandish Global Fixed | Us Government vs. Blue Current Global |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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