Correlation Between American Funds and Government Securities
Can any of the company-specific risk be diversified away by investing in both American Funds and Government Securities 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 Securities 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 Securities Fund, you can compare the effects of market volatilities on American Funds and Government Securities 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 Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Government Securities.
Diversification Opportunities for American Funds and Government Securities
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Government is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Government and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of American Funds i.e., American Funds and Government Securities go up and down completely randomly.
Pair Corralation between American Funds and Government Securities
Assuming the 90 days horizon American Funds Government is expected to under-perform the Government Securities. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Government is 1.05 times less risky than Government Securities. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Government Securities Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 878.00 in Government Securities Fund on August 28, 2024 and sell it today you would earn a total of 5.00 from holding Government Securities Fund or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Government vs. Government Securities Fund
Performance |
| Timeline |
| American Funds Government |
| Government Securities |
American Funds and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Government Securities
The main advantage of trading using opposite American Funds and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Government Securities 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 Securities will offset losses from the drop in Government Securities' long position.| American Funds vs. Touchstone Large Cap | American Funds vs. Aqr Large Cap | American Funds vs. Massmutual Select T | American Funds vs. Siit Large Cap |
| Government Securities vs. Capital Growth Fund | Government Securities vs. Emerging Markets Fund | Government Securities vs. High Income Fund | Government Securities vs. International Fund International |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |