Correlation Between American Funds and Amana Developing
Can any of the company-specific risk be diversified away by investing in both American Funds and Amana Developing 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 Amana Developing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds New and Amana Developing World, you can compare the effects of market volatilities on American Funds and Amana Developing 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 Amana Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Amana Developing.
Diversification Opportunities for American Funds and Amana Developing
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Amana is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and Amana Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Developing World 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 New are associated (or correlated) with Amana Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Developing World has no effect on the direction of American Funds i.e., American Funds and Amana Developing go up and down completely randomly.
Pair Corralation between American Funds and Amana Developing
Assuming the 90 days horizon American Funds is expected to generate 1.18 times less return on investment than Amana Developing. But when comparing it to its historical volatility, American Funds New is 1.13 times less risky than Amana Developing. It trades about 0.07 of its potential returns per unit of risk. Amana Developing World is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,187 in Amana Developing World on September 4, 2024 and sell it today you would earn a total of 183.00 from holding Amana Developing World or generate 15.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
American Funds New vs. Amana Developing World
Performance |
| Timeline |
| American Funds New |
| Amana Developing World |
American Funds and Amana Developing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Amana Developing
The main advantage of trading using opposite American Funds and Amana Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Amana Developing 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 Amana Developing will offset losses from the drop in Amana Developing's long position.| American Funds vs. Fidelity Capital Income | American Funds vs. Guggenheim High Yield | American Funds vs. Blackrock High Yield | American Funds vs. Prudential High Yield |
| Amana Developing vs. Amana Income Fund | Amana Developing vs. Amana Growth Fund | Amana Developing vs. Amana Participation Fund | Amana Developing vs. Azzad Ethical 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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