Correlation Between Money Market and American Funds
Can any of the company-specific risk be diversified away by investing in both Money Market 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 Money Market and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Money Market Obligations and American Funds Balanced, you can compare the effects of market volatilities on Money Market 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 Money Market with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Money Market and American Funds.
Diversification Opportunities for Money Market and American Funds
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Money and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations and American Funds Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Balanced and Money Market 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 Money Market Obligations 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 Balanced has no effect on the direction of Money Market i.e., Money Market and American Funds go up and down completely randomly.
Pair Corralation between Money Market and American Funds
If you would invest 1,872 in American Funds Balanced on September 14, 2024 and sell it today you would earn a total of 25.00 from holding American Funds Balanced or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Money Market Obligations vs. American Funds Balanced
Performance |
| Timeline |
| Money Market Obligations |
| American Funds Balanced |
Money Market and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Money Market and American Funds
The main advantage of trading using opposite Money Market and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Money Market 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.| Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard 500 Index | Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard Total Stock |
| American Funds vs. California High Yield Municipal | American Funds vs. Dws Government Money | American Funds vs. Baird Strategic Municipal | American Funds vs. Gamco Global Telecommunications |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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