Correlation Between American Funds and Tax-managed
Can any of the company-specific risk be diversified away by investing in both American Funds and Tax-managed 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 Tax-managed 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 Tax Managed Large Cap, you can compare the effects of market volatilities on American Funds and Tax-managed 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 Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Tax-managed.
Diversification Opportunities for American Funds and Tax-managed
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Tax-managed is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed 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 Retirement are associated (or correlated) with Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of American Funds i.e., American Funds and Tax-managed go up and down completely randomly.
Pair Corralation between American Funds and Tax-managed
Assuming the 90 days horizon American Funds is expected to generate 2.32 times less return on investment than Tax-managed. But when comparing it to its historical volatility, American Funds Retirement is 1.93 times less risky than Tax-managed. It trades about 0.08 of its potential returns per unit of risk. Tax Managed Large Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,434 in Tax Managed Large Cap on August 25, 2024 and sell it today you would earn a total of 2,447 from holding Tax Managed Large Cap or generate 45.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Tax Managed Large Cap
Performance |
| Timeline |
| American Funds Retirement |
| Tax Managed Large |
American Funds and Tax-managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Tax-managed
The main advantage of trading using opposite American Funds and Tax-managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Tax-managed 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 Tax-managed will offset losses from the drop in Tax-managed's long position.| American Funds vs. Jhancock Real Estate | American Funds vs. Virtus Real Estate | American Funds vs. Simt Real Estate | American Funds vs. Prudential Real Estate |
| Tax-managed vs. Pgim Conservative Retirement | Tax-managed vs. American Funds Retirement | Tax-managed vs. Dimensional Retirement Income | Tax-managed vs. Qs Moderate Growth |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |