Correlation Between American Funds and World Energy
Can any of the company-specific risk be diversified away by investing in both American Funds and World Energy 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 World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2050 and World Energy Fund, you can compare the effects of market volatilities on American Funds and World Energy 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 World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and World Energy.
Diversification Opportunities for American Funds and World Energy
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and World is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2050 and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy 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 2050 are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of American Funds i.e., American Funds and World Energy go up and down completely randomly.
Pair Corralation between American Funds and World Energy
Assuming the 90 days horizon American Funds 2050 is expected to generate 0.58 times more return on investment than World Energy. However, American Funds 2050 is 1.71 times less risky than World Energy. It trades about 0.15 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.06 per unit of risk. If you would invest 1,666 in American Funds 2050 on September 1, 2024 and sell it today you would earn a total of 489.00 from holding American Funds 2050 or generate 29.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Funds 2050 vs. World Energy Fund
Performance |
| Timeline |
| American Funds 2050 |
| World Energy |
American Funds and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and World Energy
The main advantage of trading using opposite American Funds and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| American Funds vs. Arrow Managed Futures | American Funds vs. Materials Portfolio Fidelity | American Funds vs. Ab Value Fund | American Funds vs. Iaadx |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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