Correlation Between American Funds and Modern Capital
Can any of the company-specific risk be diversified away by investing in both American Funds and Modern Capital 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 Modern Capital 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 Modern Capital Tactical, you can compare the effects of market volatilities on American Funds and Modern Capital 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 Modern Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Modern Capital.
Diversification Opportunities for American Funds and Modern Capital
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Modern is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Modern Capital Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modern Capital Tactical 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 Modern Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modern Capital Tactical has no effect on the direction of American Funds i.e., American Funds and Modern Capital go up and down completely randomly.
Pair Corralation between American Funds and Modern Capital
Assuming the 90 days horizon American Funds is expected to generate 1.92 times less return on investment than Modern Capital. In addition to that, American Funds is 2.05 times more volatile than Modern Capital Tactical. It trades about 0.1 of its total potential returns per unit of risk. Modern Capital Tactical is currently generating about 0.39 per unit of volatility. If you would invest 1,225 in Modern Capital Tactical on August 31, 2024 and sell it today you would earn a total of 42.00 from holding Modern Capital Tactical or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. Modern Capital Tactical
Performance |
| Timeline |
| American Funds Funda |
| Modern Capital Tactical |
American Funds and Modern Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Modern Capital
The main advantage of trading using opposite American Funds and Modern Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Modern Capital 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 Modern Capital will offset losses from the drop in Modern Capital's long position.| American Funds vs. Blackrock Inflation Protected | American Funds vs. Oklahoma College Savings | American Funds vs. Ab Bond Inflation | American Funds vs. Aqr Managed Futures |
| Modern Capital vs. American Funds American | Modern Capital vs. American Funds American | Modern Capital vs. American Balanced | Modern Capital vs. American Balanced Fund |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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