Correlation Between American Funds and Foreign Value
Can any of the company-specific risk be diversified away by investing in both American Funds and Foreign Value 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 Foreign Value 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 Foreign Value Fund, you can compare the effects of market volatilities on American Funds and Foreign Value 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 Foreign Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Foreign Value.
Diversification Opportunities for American Funds and Foreign Value
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Foreign is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Foreign Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Value 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 Foreign Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Value has no effect on the direction of American Funds i.e., American Funds and Foreign Value go up and down completely randomly.
Pair Corralation between American Funds and Foreign Value
Assuming the 90 days horizon American Funds Retirement is expected to generate 0.43 times more return on investment than Foreign Value. However, American Funds Retirement is 2.3 times less risky than Foreign Value. It trades about 0.25 of its potential returns per unit of risk. Foreign Value Fund is currently generating about 0.05 per unit of risk. If you would invest 1,262 in American Funds Retirement on September 2, 2024 and sell it today you would earn a total of 23.00 from holding American Funds Retirement or generate 1.82% 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. Foreign Value Fund
Performance |
| Timeline |
| American Funds Retirement |
| Foreign Value |
American Funds and Foreign Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Foreign Value
The main advantage of trading using opposite American Funds and Foreign Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Foreign Value 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 Foreign Value will offset losses from the drop in Foreign Value'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 |
| Foreign Value vs. Mid Cap Index | Foreign Value vs. Mid Cap Strategic | Foreign Value vs. Valic Company I | Foreign Value 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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