Correlation Between New Perspective and American Fds
Can any of the company-specific risk be diversified away by investing in both New Perspective and American Fds 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 New Perspective and American Fds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Perspective Fund and American Fds Smallcap, you can compare the effects of market volatilities on New Perspective and American Fds 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 New Perspective with a short position of American Fds. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and American Fds.
Diversification Opportunities for New Perspective and American Fds
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and American Fds Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Fds Smallcap and New Perspective 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 New Perspective Fund are associated (or correlated) with American Fds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Fds Smallcap has no effect on the direction of New Perspective i.e., New Perspective and American Fds go up and down completely randomly.
Pair Corralation between New Perspective and American Fds
Assuming the 90 days horizon New Perspective Fund is expected to under-perform the American Fds. But the mutual fund apears to be less risky and, when comparing its historical volatility, New Perspective Fund is 1.22 times less risky than American Fds. The mutual fund trades about -0.01 of its potential returns per unit of risk. The American Fds Smallcap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,723 in American Fds Smallcap on August 31, 2024 and sell it today you would earn a total of 23.00 from holding American Fds Smallcap or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Perspective Fund vs. American Fds Smallcap
Performance |
| Timeline |
| New Perspective |
| American Fds Smallcap |
New Perspective and American Fds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and American Fds
The main advantage of trading using opposite New Perspective and American Fds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, American Fds 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 Fds will offset losses from the drop in American Fds' long position.| New Perspective vs. Americafirst Large Cap | New Perspective vs. Touchstone Large Cap | New Perspective vs. Qs Large Cap | New Perspective vs. Large Cap Growth Profund |
| American Fds vs. American Funds Smallcap | American Fds vs. Smallcap World Fund | American Fds vs. Smallcap World Fund | American Fds vs. Smallcap World 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |