Correlation Between American Funds and Performance Trust
Can any of the company-specific risk be diversified away by investing in both American Funds and Performance Trust 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 Performance Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Performance Trust Strategic, you can compare the effects of market volatilities on American Funds and Performance Trust 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 Performance Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Performance Trust.
Diversification Opportunities for American Funds and Performance Trust
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Performance is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Performance Trust Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Trust 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 Fundamental are associated (or correlated) with Performance Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Trust has no effect on the direction of American Funds i.e., American Funds and Performance Trust go up and down completely randomly.
Pair Corralation between American Funds and Performance Trust
Assuming the 90 days horizon American Funds Fundamental is expected to generate 2.14 times more return on investment than Performance Trust. However, American Funds is 2.14 times more volatile than Performance Trust Strategic. It trades about 0.1 of its potential returns per unit of risk. Performance Trust Strategic is currently generating about 0.11 per unit of risk. If you would invest 8,579 in American Funds Fundamental on August 29, 2024 and sell it today you would earn a total of 155.00 from holding American Funds Fundamental or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. Performance Trust Strategic
Performance |
| Timeline |
| American Funds Funda |
| Performance Trust |
American Funds and Performance Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Performance Trust
The main advantage of trading using opposite American Funds and Performance Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Performance Trust 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 Performance Trust will offset losses from the drop in Performance Trust's long position.| American Funds vs. Upright Assets Allocation | American Funds vs. Pace Large Value | American Funds vs. Washington Mutual Investors | American Funds vs. Touchstone Large Cap |
| Performance Trust vs. Ab Global Risk | Performance Trust vs. Massmutual Premier Global | Performance Trust vs. Wisdomtree Siegel Global | Performance Trust vs. Ab Global Bond |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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