Correlation Between SPACE and American Funds
Can any of the company-specific risk be diversified away by investing in both SPACE and American Funds 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 SPACE and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPACE and American Funds 2040, you can compare the effects of market volatilities on SPACE and American Funds 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 SPACE with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and American Funds.
Diversification Opportunities for SPACE and American Funds
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SPACE and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and American Funds 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2040 and SPACE 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 SPACE are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2040 has no effect on the direction of SPACE i.e., SPACE and American Funds go up and down completely randomly.
Pair Corralation between SPACE and American Funds
Assuming the 90 days horizon SPACE is expected to under-perform the American Funds. In addition to that, SPACE is 5.34 times more volatile than American Funds 2040. It trades about -0.15 of its total potential returns per unit of risk. American Funds 2040 is currently generating about 0.0 per unit of volatility. If you would invest 2,107 in American Funds 2040 on October 24, 2024 and sell it today you would lose (1.00) from holding American Funds 2040 or give up 0.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 85.71% |
| Values | Daily Returns |
SPACE vs. American Funds 2040
Performance |
| Timeline |
| SPACE |
| American Funds 2040 |
SPACE and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPACE and American Funds
The main advantage of trading using opposite SPACE and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.The idea behind SPACE and American Funds 2040 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| American Funds vs. Guidepath Conservative Income | American Funds vs. Calvert Conservative Allocation | American Funds vs. Federated Hermes Conservative | American Funds vs. Voya Solution Conservative |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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