Correlation Between Portfolio and American Funds
Can any of the company-specific risk be diversified away by investing in both Portfolio 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 Portfolio and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Portfolio 21 Global and American Funds Tax Advantaged, you can compare the effects of market volatilities on Portfolio 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 Portfolio with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portfolio and American Funds.
Diversification Opportunities for Portfolio and American Funds
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Portfolio and AMERICAN is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Portfolio 21 Global and American Funds Tax Advantaged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Tax and Portfolio 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 Portfolio 21 Global 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 Tax has no effect on the direction of Portfolio i.e., Portfolio and American Funds go up and down completely randomly.
Pair Corralation between Portfolio and American Funds
Assuming the 90 days horizon Portfolio is expected to generate 1.3 times less return on investment than American Funds. In addition to that, Portfolio is 2.04 times more volatile than American Funds Tax Advantaged. It trades about 0.05 of its total potential returns per unit of risk. American Funds Tax Advantaged is currently generating about 0.14 per unit of volatility. If you would invest 1,534 in American Funds Tax Advantaged on September 3, 2024 and sell it today you would earn a total of 127.00 from holding American Funds Tax Advantaged or generate 8.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Portfolio 21 Global vs. American Funds Tax Advantaged
Performance |
| Timeline |
| Portfolio 21 Global |
| American Funds Tax |
Portfolio and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Portfolio and American Funds
The main advantage of trading using opposite Portfolio and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Portfolio 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.| Portfolio vs. Pax Small Cap | Portfolio vs. John Hancock Esg | Portfolio vs. Pax Global Environmental | Portfolio vs. Portfolio 21 Global |
| American Funds vs. Vanguard Lifestrategy Moderate | American Funds vs. Vanguard Lifestrategy Income | American Funds vs. Vanguard Lifestrategy Growth | American Funds vs. Vanguard Explorer Fund |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |