Correlation Between American Funds and American Funds
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2020 and American Funds 2025, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and American Funds.
Diversification Opportunities for American Funds and American Funds
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and American is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2020 and American Funds 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2025 and American Funds 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 American Funds 2020 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 2025 has no effect on the direction of American Funds i.e., American Funds and American Funds go up and down completely randomly.
Pair Corralation between American Funds and American Funds
Assuming the 90 days horizon American Funds is expected to generate 1.12 times less return on investment than American Funds. But when comparing it to its historical volatility, American Funds 2020 is 1.06 times less risky than American Funds. It trades about 0.25 of its potential returns per unit of risk. American Funds 2025 is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,575 in American Funds 2025 on September 1, 2024 and sell it today you would earn a total of 29.00 from holding American Funds 2025 or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds 2020 vs. American Funds 2025
Performance |
| Timeline |
| American Funds 2020 |
| American Funds 2025 |
American Funds and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and American Funds
The main advantage of trading using opposite American Funds and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. American Funds 2025 | American Funds vs. American Funds 2030 | American Funds vs. American Funds 2035 | American Funds vs. American Funds 2040 |
| American Funds vs. American Funds 2030 | American Funds vs. American Funds 2020 | American Funds vs. American Funds 2035 | American Funds vs. American Funds 2045 |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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