Correlation Between American Funds and Seafarer Overseas
Can any of the company-specific risk be diversified away by investing in both American Funds and Seafarer Overseas 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 Seafarer Overseas 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 Seafarer Overseas Growth, you can compare the effects of market volatilities on American Funds and Seafarer Overseas 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 Seafarer Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Seafarer Overseas.
Diversification Opportunities for American Funds and Seafarer Overseas
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Seafarer is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and Seafarer Overseas Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Overseas Growth 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 Seafarer Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Overseas Growth has no effect on the direction of American Funds i.e., American Funds and Seafarer Overseas go up and down completely randomly.
Pair Corralation between American Funds and Seafarer Overseas
Assuming the 90 days horizon American Funds New is expected to generate 0.88 times more return on investment than Seafarer Overseas. However, American Funds New is 1.14 times less risky than Seafarer Overseas. It trades about -0.13 of its potential returns per unit of risk. Seafarer Overseas Growth is currently generating about -0.11 per unit of risk. If you would invest 8,221 in American Funds New on September 2, 2024 and sell it today you would lose (135.00) from holding American Funds New or give up 1.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds New vs. Seafarer Overseas Growth
Performance |
| Timeline |
| American Funds New |
| Seafarer Overseas Growth |
American Funds and Seafarer Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Seafarer Overseas
The main advantage of trading using opposite American Funds and Seafarer Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Seafarer Overseas 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 Seafarer Overseas will offset losses from the drop in Seafarer Overseas' long position.| American Funds vs. Davis Financial Fund | American Funds vs. Blackrock Financial Institutions | American Funds vs. Royce Global Financial | American Funds vs. Icon Financial Fund |
| Seafarer Overseas vs. Alliancebernstein Global High | Seafarer Overseas vs. Legg Mason Partners | Seafarer Overseas vs. Ab Global Risk | Seafarer Overseas vs. Needham Aggressive Growth |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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