Correlation Between New Perspective and American Funds
Can any of the company-specific risk be diversified away by investing in both New Perspective 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 New Perspective and American Funds 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 Funds 2030, you can compare the effects of market volatilities on New Perspective 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 New Perspective with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and American Funds.
Diversification Opportunities for New Perspective and American Funds
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and American is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and American Funds 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2030 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 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 2030 has no effect on the direction of New Perspective i.e., New Perspective and American Funds go up and down completely randomly.
Pair Corralation between New Perspective and American Funds
Assuming the 90 days horizon New Perspective Fund is expected to generate 1.52 times more return on investment than American Funds. However, New Perspective is 1.52 times more volatile than American Funds 2030. It trades about 0.1 of its potential returns per unit of risk. American Funds 2030 is currently generating about 0.1 per unit of risk. If you would invest 4,611 in New Perspective Fund on August 31, 2024 and sell it today you would earn a total of 1,985 from holding New Perspective Fund or generate 43.05% 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 Funds 2030
Performance |
| Timeline |
| New Perspective |
| American Funds 2030 |
New Perspective and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and American Funds
The main advantage of trading using opposite New Perspective and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective 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.| New Perspective vs. Washington Mutual Investors | New Perspective vs. American Balanced Fund | New Perspective vs. New World Fund | New Perspective vs. Europacific Growth Fund |
| American Funds vs. Touchstone Small Cap | American Funds vs. Tax Managed Mid Small | American Funds vs. Ab Small Cap | American Funds vs. Champlain Small |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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