Correlation Between American Funds and Growth Fund
Can any of the company-specific risk be diversified away by investing in both American Funds and Growth Fund 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 Growth Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Growth Fund Of, you can compare the effects of market volatilities on American Funds and Growth Fund 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 Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Growth Fund.
Diversification Opportunities for American Funds and Growth Fund
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Growth is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Growth Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund 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 Fundamental are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund has no effect on the direction of American Funds i.e., American Funds and Growth Fund go up and down completely randomly.
Pair Corralation between American Funds and Growth Fund
Assuming the 90 days horizon American Funds is expected to generate 1.93 times less return on investment than Growth Fund. But when comparing it to its historical volatility, American Funds Fundamental is 1.22 times less risky than Growth Fund. It trades about 0.12 of its potential returns per unit of risk. Growth Fund Of is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 7,897 in Growth Fund Of on August 28, 2024 and sell it today you would earn a total of 326.00 from holding Growth Fund Of or generate 4.13% 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 Fundamental vs. Growth Fund Of
Performance |
| Timeline |
| American Funds Funda |
| Growth Fund |
American Funds and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Growth Fund
The main advantage of trading using opposite American Funds and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Growth Fund 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 Growth Fund will offset losses from the drop in Growth Fund'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 |
| Growth Fund vs. Smallcap World Fund | Growth Fund vs. American Funds Fundamental | Growth Fund vs. American Balanced Fund | Growth Fund vs. New Perspective 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |