Correlation Between NYSE Composite and American Funds
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and American Funds Growth, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and American Funds.
Diversification Opportunities for NYSE Composite and American Funds
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and NYSE Composite 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 NYSE Composite 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 Growth has no effect on the direction of NYSE Composite i.e., NYSE Composite and American Funds go up and down completely randomly.
Pair Corralation between NYSE Composite and American Funds
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.02 times less return on investment than American Funds. But when comparing it to its historical volatility, NYSE Composite is 1.32 times less risky than American Funds. It trades about 0.11 of its potential returns per unit of risk. American Funds Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,390 in American Funds Growth on August 25, 2024 and sell it today you would earn a total of 339.00 from holding American Funds Growth or generate 14.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
NYSE Composite vs. American Funds Growth
Performance |
| Timeline |
NYSE Composite and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
American Funds Growth
Pair trading matchups for American Funds
Pair Trading with NYSE Composite and American Funds
The main advantage of trading using opposite NYSE Composite and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Glacier Bancorp | NYSE Composite vs. LithiumBank Resources Corp | NYSE Composite vs. Stepstone Group | NYSE Composite vs. Pintec Technology Holdings |
| American Funds vs. Short Precious Metals | American Funds vs. Franklin Gold Precious | American Funds vs. Wells Fargo Advantage | American Funds vs. International Investors Gold |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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