Correlation Between American Funds and Government High
Can any of the company-specific risk be diversified away by investing in both American Funds and Government High 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 Government High 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 Government High Quality, you can compare the effects of market volatilities on American Funds and Government High 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 Government High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Government High.
Diversification Opportunities for American Funds and Government High
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Government is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Government and Government High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government High Quality 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 Government High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government High Quality has no effect on the direction of American Funds i.e., American Funds and Government High go up and down completely randomly.
Pair Corralation between American Funds and Government High
Assuming the 90 days horizon American Funds Government is expected to generate 0.92 times more return on investment than Government High. However, American Funds Government is 1.09 times less risky than Government High. It trades about 0.1 of its potential returns per unit of risk. Government High Quality is currently generating about 0.05 per unit of risk. If you would invest 1,166 in American Funds Government on October 25, 2024 and sell it today you would earn a total of 7.00 from holding American Funds Government or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Funds Government vs. Government High Quality
Performance |
| Timeline |
| American Funds Government |
| Government High Quality |
American Funds and Government High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Government High
The main advantage of trading using opposite American Funds and Government High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Government High 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 Government High will offset losses from the drop in Government High's long position.| American Funds vs. Tax Managed Mid Small | American Funds vs. Franklin Small Cap | American Funds vs. Astoncrosswind Small Cap | American Funds vs. Kinetics Small 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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