Correlation Between Real Estate and American Funds
Can any of the company-specific risk be diversified away by investing in both Real Estate and American Funds 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 Real Estate and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Estate Ultrasector and American Funds 2065, you can compare the effects of market volatilities on Real Estate and American Funds 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 Real Estate with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and American Funds.
Diversification Opportunities for Real Estate and American Funds
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Real and American is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Ultrasector and American Funds 2065 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2065 and Real Estate 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 Real Estate Ultrasector are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2065 has no effect on the direction of Real Estate i.e., Real Estate and American Funds go up and down completely randomly.
Pair Corralation between Real Estate and American Funds
Assuming the 90 days horizon Real Estate Ultrasector is expected to generate 2.24 times more return on investment than American Funds. However, Real Estate is 2.24 times more volatile than American Funds 2065. It trades about 0.07 of its potential returns per unit of risk. American Funds 2065 is currently generating about 0.12 per unit of risk. If you would invest 3,721 in Real Estate Ultrasector on September 4, 2024 and sell it today you would earn a total of 1,083 from holding Real Estate Ultrasector or generate 29.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Estate Ultrasector vs. American Funds 2065
Performance |
| Timeline |
| Real Estate Ultrasector |
| American Funds 2065 |
Real Estate and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Estate and American Funds
The main advantage of trading using opposite Real Estate and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Real Estate vs. Davis Financial Fund | Real Estate vs. Mesirow Financial Small | Real Estate vs. Goldman Sachs Financial | Real Estate vs. Royce Global Financial |
| American Funds vs. Real Estate Ultrasector | American Funds vs. Simt Real Estate | American Funds vs. Guggenheim Risk Managed | American Funds vs. Forum Real Estate |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |