Correlation Between American Funds and California High-yield
Can any of the company-specific risk be diversified away by investing in both American Funds and California High-yield 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 California High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Balanced and California High Yield Municipal, you can compare the effects of market volatilities on American Funds and California High-yield 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 California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and California High-yield.
Diversification Opportunities for American Funds and California High-yield
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and California is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Balanced and California High Yield Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California High Yield 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 Balanced are associated (or correlated) with California High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California High Yield has no effect on the direction of American Funds i.e., American Funds and California High-yield go up and down completely randomly.
Pair Corralation between American Funds and California High-yield
Assuming the 90 days horizon American Funds Balanced is expected to generate 1.83 times more return on investment than California High-yield. However, American Funds is 1.83 times more volatile than California High Yield Municipal. It trades about 0.1 of its potential returns per unit of risk. California High Yield Municipal is currently generating about 0.07 per unit of risk. If you would invest 1,442 in American Funds Balanced on December 4, 2024 and sell it today you would earn a total of 415.00 from holding American Funds Balanced or generate 28.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Funds Balanced vs. California High Yield Municipa
Performance |
| Timeline |
| American Funds Balanced |
| California High Yield |
American Funds and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and California High-yield
The main advantage of trading using opposite American Funds and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, California High-yield 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 California High-yield will offset losses from the drop in California High-yield's long position.| American Funds vs. Ab Global Real | American Funds vs. Aqr Global Macro | American Funds vs. Morningstar Global Income | American Funds vs. Gmo Global Equity |
| California High-yield vs. Rbc Emerging Markets | California High-yield vs. Pimco Emerging Markets | California High-yield vs. Commodities Strategy Fund | California High-yield vs. Eagle Mlp Strategy |
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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