Correlation Between American Funds and Delaware Small
Can any of the company-specific risk be diversified away by investing in both American Funds and Delaware Small 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 Delaware Small 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 Delaware Small Cap, you can compare the effects of market volatilities on American Funds and Delaware Small 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 Delaware Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Delaware Small.
Diversification Opportunities for American Funds and Delaware Small
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Delaware is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Delaware Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware Small Cap 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 Delaware Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware Small Cap has no effect on the direction of American Funds i.e., American Funds and Delaware Small go up and down completely randomly.
Pair Corralation between American Funds and Delaware Small
Assuming the 90 days horizon American Funds is expected to generate 8.15 times less return on investment than Delaware Small. But when comparing it to its historical volatility, American Funds Retirement is 4.42 times less risky than Delaware Small. It trades about 0.18 of its potential returns per unit of risk. Delaware Small Cap is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,910 in Delaware Small Cap on September 1, 2024 and sell it today you would earn a total of 325.00 from holding Delaware Small Cap or generate 11.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds Retirement vs. Delaware Small Cap
Performance |
| Timeline |
| American Funds Retirement |
| Delaware Small Cap |
American Funds and Delaware Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Delaware Small
The main advantage of trading using opposite American Funds and Delaware Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Delaware Small 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 Delaware Small will offset losses from the drop in Delaware Small's long position.| American Funds vs. Mesirow Financial Small | American Funds vs. Davis Financial Fund | American Funds vs. Icon Financial Fund | American Funds vs. Blackrock Financial Institutions |
| Delaware Small vs. Blackrock Moderate Prepared | Delaware Small vs. American Funds Retirement | Delaware Small vs. Target Retirement 2040 | Delaware Small vs. Dimensional Retirement Income |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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