Correlation Between American Funds and Nebraska Municipal
Can any of the company-specific risk be diversified away by investing in both American Funds and Nebraska Municipal 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 Nebraska Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2040 and Nebraska Municipal Fund, you can compare the effects of market volatilities on American Funds and Nebraska Municipal 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 Nebraska Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Nebraska Municipal.
Diversification Opportunities for American Funds and Nebraska Municipal
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Nebraska is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2040 and Nebraska Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nebraska Municipal 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 2040 are associated (or correlated) with Nebraska Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nebraska Municipal has no effect on the direction of American Funds i.e., American Funds and Nebraska Municipal go up and down completely randomly.
Pair Corralation between American Funds and Nebraska Municipal
Assuming the 90 days horizon American Funds 2040 is expected to generate 2.69 times more return on investment than Nebraska Municipal. However, American Funds is 2.69 times more volatile than Nebraska Municipal Fund. It trades about 0.08 of its potential returns per unit of risk. Nebraska Municipal Fund is currently generating about 0.01 per unit of risk. If you would invest 1,617 in American Funds 2040 on November 27, 2024 and sell it today you would earn a total of 442.00 from holding American Funds 2040 or generate 27.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
American Funds 2040 vs. Nebraska Municipal Fund
Performance |
| Timeline |
| American Funds 2040 |
| Nebraska Municipal |
American Funds and Nebraska Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Nebraska Municipal
The main advantage of trading using opposite American Funds and Nebraska Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Nebraska Municipal 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 Nebraska Municipal will offset losses from the drop in Nebraska Municipal's long position.| American Funds vs. Tiaa Cref High Yield Fund | American Funds vs. Simt High Yield | American Funds vs. Prudential High Yield | American Funds vs. Neuberger Berman Income |
| Nebraska Municipal vs. Aqr Managed Futures | Nebraska Municipal vs. The Hartford Inflation | Nebraska Municipal vs. Ab Bond Inflation | Nebraska Municipal vs. The Hartford Inflation |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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