Correlation Between American Funds and Value Fund
Can any of the company-specific risk be diversified away by investing in both American Funds and Value Fund 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 Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Value Fund I, you can compare the effects of market volatilities on American Funds and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Value Fund.
Diversification Opportunities for American Funds and Value Fund
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Value is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Value Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund I 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 Retirement are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund I has no effect on the direction of American Funds i.e., American Funds and Value Fund go up and down completely randomly.
Pair Corralation between American Funds and Value Fund
Assuming the 90 days horizon American Funds is expected to generate 1.1 times less return on investment than Value Fund. But when comparing it to its historical volatility, American Funds Retirement is 1.65 times less risky than Value Fund. It trades about 0.11 of its potential returns per unit of risk. Value Fund I is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 754.00 in Value Fund I on September 2, 2024 and sell it today you would earn a total of 141.00 from holding Value Fund I or generate 18.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Value Fund I
Performance |
| Timeline |
| American Funds Retirement |
| Value Fund I |
American Funds and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Value Fund
The main advantage of trading using opposite American Funds and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.| American Funds vs. Shelton Emerging Markets | American Funds vs. Pnc Emerging Markets | American Funds vs. Dws Emerging Markets | American Funds vs. Doubleline Emerging Markets |
| Value Fund vs. International Investors Gold | Value Fund vs. Goldman Sachs Esg | Value Fund vs. James Balanced Golden | Value Fund vs. Gamco Global Gold |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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