Correlation Between Pace Smallmedium and American Funds
Can any of the company-specific risk be diversified away by investing in both Pace Smallmedium 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 Pace Smallmedium and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Smallmedium Growth and American Funds Capital, you can compare the effects of market volatilities on Pace Smallmedium 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 Pace Smallmedium with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Smallmedium and American Funds.
Diversification Opportunities for Pace Smallmedium and American Funds
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pace and American is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Growth and American Funds Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Capital and Pace Smallmedium 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 Pace Smallmedium Growth 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 Capital has no effect on the direction of Pace Smallmedium i.e., Pace Smallmedium and American Funds go up and down completely randomly.
Pair Corralation between Pace Smallmedium and American Funds
Assuming the 90 days horizon Pace Smallmedium is expected to generate 1.03 times less return on investment than American Funds. In addition to that, Pace Smallmedium is 1.58 times more volatile than American Funds Capital. It trades about 0.06 of its total potential returns per unit of risk. American Funds Capital is currently generating about 0.1 per unit of volatility. If you would invest 4,869 in American Funds Capital on September 12, 2024 and sell it today you would earn a total of 2,103 from holding American Funds Capital or generate 43.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Smallmedium Growth vs. American Funds Capital
Performance |
| Timeline |
| Pace Smallmedium Growth |
| American Funds Capital |
Pace Smallmedium and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Smallmedium and American Funds
The main advantage of trading using opposite Pace Smallmedium and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Smallmedium 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.| Pace Smallmedium vs. Needham Aggressive Growth | Pace Smallmedium vs. Ultramid Cap Profund Ultramid Cap | Pace Smallmedium vs. HUMANA INC | Pace Smallmedium vs. Barloworld Ltd ADR |
| American Funds vs. Capital World Growth | American Funds vs. Capital World Growth | American Funds vs. Capital World Growth | American Funds vs. Capital World Growth |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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