Correlation Between American Funds and Intermediate-term
Can any of the company-specific risk be diversified away by investing in both American Funds and Intermediate-term 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 Intermediate-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2060 and Intermediate Term Tax Free Bond, you can compare the effects of market volatilities on American Funds and Intermediate-term 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 Intermediate-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Intermediate-term.
Diversification Opportunities for American Funds and Intermediate-term
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Intermediate-term is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2060 and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 2060 are associated (or correlated) with Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of American Funds i.e., American Funds and Intermediate-term go up and down completely randomly.
Pair Corralation between American Funds and Intermediate-term
Assuming the 90 days horizon American Funds 2060 is expected to generate 4.0 times more return on investment than Intermediate-term. However, American Funds is 4.0 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.07 of its potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.12 per unit of risk. If you would invest 1,736 in American Funds 2060 on August 24, 2024 and sell it today you would earn a total of 118.00 from holding American Funds 2060 or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2060 vs. Intermediate Term Tax Free Bon
Performance |
| Timeline |
| American Funds 2060 |
| Intermediate Term Tax |
American Funds and Intermediate-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Intermediate-term
The main advantage of trading using opposite American Funds and Intermediate-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Intermediate-term 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 Intermediate-term will offset losses from the drop in Intermediate-term's long position.| American Funds vs. ABIVAX Socit Anonyme | American Funds vs. SCOR PK | American Funds vs. HUMANA INC | American Funds vs. Aquagold International |
| Intermediate-term vs. American Funds 2060 | Intermediate-term vs. Oklahoma College Savings | Intermediate-term vs. T Rowe Price | Intermediate-term vs. Valic Company I |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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