Correlation Between Retirement Living and American Funds
Can any of the company-specific risk be diversified away by investing in both Retirement Living 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 Retirement Living and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retirement Living Through and American Funds 2055, you can compare the effects of market volatilities on Retirement Living 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 Retirement Living with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retirement Living and American Funds.
Diversification Opportunities for Retirement Living and American Funds
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RETIREMENT and American is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Retirement Living Through and American Funds 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2055 and Retirement Living 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 Retirement Living Through 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 2055 has no effect on the direction of Retirement Living i.e., Retirement Living and American Funds go up and down completely randomly.
Pair Corralation between Retirement Living and American Funds
Assuming the 90 days horizon Retirement Living Through is expected to under-perform the American Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Retirement Living Through is 1.01 times less risky than American Funds. The mutual fund trades about -0.03 of its potential returns per unit of risk. The American Funds 2055 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,653 in American Funds 2055 on October 25, 2024 and sell it today you would lose (16.00) from holding American Funds 2055 or give up 0.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retirement Living Through vs. American Funds 2055
Performance |
| Timeline |
| Retirement Living Through |
| American Funds 2055 |
Retirement Living and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retirement Living and American Funds
The main advantage of trading using opposite Retirement Living and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retirement Living 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.| Retirement Living vs. Vanguard Target Retirement | Retirement Living vs. American Funds 2055 | Retirement Living vs. American Funds 2055 | Retirement Living vs. American Funds 2055 |
| American Funds vs. Vy T Rowe | American Funds vs. Federated Hermes Conservative | American Funds vs. Goldman Sachs Short Term | American Funds vs. Allianzgi Diversified Income |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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