Correlation Between American Funds and International Investors
Can any of the company-specific risk be diversified away by investing in both American Funds and International Investors 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 International Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Washington and International Investors Gold, you can compare the effects of market volatilities on American Funds and International Investors 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 International Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and International Investors.
Diversification Opportunities for American Funds and International Investors
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and International is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Washington and International Investors Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Investors 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 Washington are associated (or correlated) with International Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Investors has no effect on the direction of American Funds i.e., American Funds and International Investors go up and down completely randomly.
Pair Corralation between American Funds and International Investors
Assuming the 90 days horizon American Funds is expected to generate 5.32 times less return on investment than International Investors. But when comparing it to its historical volatility, American Funds Washington is 1.91 times less risky than International Investors. It trades about 0.04 of its potential returns per unit of risk. International Investors Gold is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 752.00 in International Investors Gold on January 23, 2025 and sell it today you would earn a total of 813.00 from holding International Investors Gold or generate 108.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Washington vs. International Investors Gold
Performance |
| Timeline |
| American Funds Washington |
| International Investors |
American Funds and International Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and International Investors
The main advantage of trading using opposite American Funds and International Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, International Investors 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 International Investors will offset losses from the drop in International Investors' long position.| American Funds vs. Income Fund Of | American Funds vs. American Funds 2015 | American Funds vs. New World Fund | American Funds vs. American Mutual 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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