Correlation Between American Funds and Gmo High
Can any of the company-specific risk be diversified away by investing in both American Funds and Gmo High 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 Gmo High 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 Gmo High Yield, you can compare the effects of market volatilities on American Funds and Gmo High 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 Gmo High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Gmo High.
Diversification Opportunities for American Funds and Gmo High
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Gmo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Gmo High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo High Yield 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 Gmo High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo High Yield has no effect on the direction of American Funds i.e., American Funds and Gmo High go up and down completely randomly.
Pair Corralation between American Funds and Gmo High
Assuming the 90 days horizon American Funds Fundamental is expected to generate 2.77 times more return on investment than Gmo High. However, American Funds is 2.77 times more volatile than Gmo High Yield. It trades about 0.12 of its potential returns per unit of risk. Gmo High Yield is currently generating about 0.13 per unit of risk. If you would invest 5,593 in American Funds Fundamental on September 13, 2024 and sell it today you would earn a total of 3,372 from holding American Funds Fundamental or generate 60.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.82% |
| Values | Daily Returns |
American Funds Fundamental vs. Gmo High Yield
Performance |
| Timeline |
| American Funds Funda |
| Gmo High Yield |
American Funds and Gmo High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Gmo High
The main advantage of trading using opposite American Funds and Gmo High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Gmo High 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 Gmo High will offset losses from the drop in Gmo High's long position.| American Funds vs. Touchstone Premium Yield | American Funds vs. The National Tax Free | American Funds vs. Dreyfusstandish Global Fixed | American Funds vs. Ishares Municipal Bond |
| Gmo High vs. General Money Market | Gmo High vs. Edward Jones Money | Gmo High vs. The Gabelli Money | Gmo High vs. Prudential Government Money |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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