Correlation Between Growth Fund and American Funds
Can any of the company-specific risk be diversified away by investing in both Growth Fund and American Funds 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 Growth Fund and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and American Funds Amcap, you can compare the effects of market volatilities on Growth Fund and American Funds 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 Growth Fund with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and American Funds.
Diversification Opportunities for Growth Fund and American Funds
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GROWTH and American is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and American Funds Amcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Amcap and Growth Fund 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 Growth Fund Of are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Amcap has no effect on the direction of Growth Fund i.e., Growth Fund and American Funds go up and down completely randomly.
Pair Corralation between Growth Fund and American Funds
Assuming the 90 days horizon Growth Fund Of is expected to generate 1.09 times more return on investment than American Funds. However, Growth Fund is 1.09 times more volatile than American Funds Amcap. It trades about 0.1 of its potential returns per unit of risk. American Funds Amcap is currently generating about 0.06 per unit of risk. If you would invest 6,813 in Growth Fund Of on August 27, 2024 and sell it today you would earn a total of 1,253 from holding Growth Fund Of or generate 18.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. American Funds Amcap
Performance |
| Timeline |
| Growth Fund |
| American Funds Amcap |
Growth Fund and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and American Funds
The main advantage of trading using opposite Growth Fund and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Growth Fund vs. Income Fund Of | Growth Fund vs. New World Fund | Growth Fund vs. American Mutual Fund | Growth Fund vs. American Mutual Fund |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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