Correlation Between American Funds and Us Government
Can any of the company-specific risk be diversified away by investing in both American Funds and Us Government 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 Us Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Income and Us Government Securities, you can compare the effects of market volatilities on American Funds and Us Government 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 Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Us Government.
Diversification Opportunities for American Funds and Us Government
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and UGSFX is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Income and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities 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 Income are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of American Funds i.e., American Funds and Us Government go up and down completely randomly.
Pair Corralation between American Funds and Us Government
Assuming the 90 days horizon American Funds Income is expected to under-perform the Us Government. In addition to that, American Funds is 1.07 times more volatile than Us Government Securities. It trades about -0.01 of its total potential returns per unit of risk. Us Government Securities is currently generating about 0.15 per unit of volatility. If you would invest 1,185 in Us Government Securities on September 12, 2024 and sell it today you would earn a total of 10.00 from holding Us Government Securities or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Income vs. Us Government Securities
Performance |
| Timeline |
| American Funds Income |
| Us Government Securities |
American Funds and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Us Government
The main advantage of trading using opposite American Funds and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Us Government 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 Us Government will offset losses from the drop in Us Government's long position.| American Funds vs. Vanguard Wellesley Income | American Funds vs. Vanguard Wellesley Income | American Funds vs. Blackrock Multi Asset Income | American Funds vs. The Hartford Balanced |
| Us Government vs. Bond Fund Of | Us Government vs. Intermediate Bond Fund | Us Government vs. Capital World Bond | Us Government vs. American Mutual 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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