Correlation Between American Funds and Old Westbury
Can any of the company-specific risk be diversified away by investing in both American Funds and Old Westbury 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 Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Smallcap and Old Westbury Small, you can compare the effects of market volatilities on American Funds and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Old Westbury.
Diversification Opportunities for American Funds and Old Westbury
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Old is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Smallcap and Old Westbury Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Small 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 Smallcap are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Small has no effect on the direction of American Funds i.e., American Funds and Old Westbury go up and down completely randomly.
Pair Corralation between American Funds and Old Westbury
Assuming the 90 days horizon American Funds is expected to generate 1.07 times less return on investment than Old Westbury. In addition to that, American Funds is 1.1 times more volatile than Old Westbury Small. It trades about 0.05 of its total potential returns per unit of risk. Old Westbury Small is currently generating about 0.05 per unit of volatility. If you would invest 1,408 in Old Westbury Small on August 24, 2024 and sell it today you would earn a total of 325.00 from holding Old Westbury Small or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Smallcap vs. Old Westbury Small
Performance |
| Timeline |
| American Funds Smallcap |
| Old Westbury Small |
American Funds and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Old Westbury
The main advantage of trading using opposite American Funds and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| American Funds vs. American Fds Smallcap | American Funds vs. Smallcap World Fund | American Funds vs. Smallcap World Fund | American Funds vs. Smallcap World Fund |
| Old Westbury vs. Scharf Global Opportunity | Old Westbury vs. Ab Value Fund | Old Westbury vs. Fa 529 Aggressive | Old Westbury vs. Materials Portfolio Fidelity |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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