Correlation Between American Funds and Old Westbury
Can any of the company-specific risk be diversified away by investing in both American Funds and Old Westbury 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 Old Westbury 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 Old Westbury Large, you can compare the effects of market volatilities on American Funds and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Old Westbury.
Diversification Opportunities for American Funds and Old Westbury
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Old is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2040 and Old Westbury Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Large 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Large has no effect on the direction of American Funds i.e., American Funds and Old Westbury go up and down completely randomly.
Pair Corralation between American Funds and Old Westbury
Assuming the 90 days horizon American Funds 2040 is expected to generate 0.96 times more return on investment than Old Westbury. However, American Funds 2040 is 1.04 times less risky than Old Westbury. It trades about 0.14 of its potential returns per unit of risk. Old Westbury Large is currently generating about 0.09 per unit of risk. If you would invest 2,142 in American Funds 2040 on September 13, 2024 and sell it today you would earn a total of 29.00 from holding American Funds 2040 or generate 1.35% 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 2040 vs. Old Westbury Large
Performance |
| Timeline |
| American Funds 2040 |
| Old Westbury Large |
American Funds and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Old Westbury
The main advantage of trading using opposite American Funds and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Old Westbury vs. Prudential Government Income | Old Westbury vs. Franklin Adjustable Government | Old Westbury vs. Payden Government Fund | Old Westbury vs. Short Term Government Fund |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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