Correlation Between American Funds and Sierra Core
Can any of the company-specific risk be diversified away by investing in both American Funds and Sierra Core 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 Sierra Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Sierra E Retirement, you can compare the effects of market volatilities on American Funds and Sierra Core 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 Sierra Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Sierra Core.
Diversification Opportunities for American Funds and Sierra Core
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Sierra is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Sierra E Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra E Retirement 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 Retirement are associated (or correlated) with Sierra Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra E Retirement has no effect on the direction of American Funds i.e., American Funds and Sierra Core go up and down completely randomly.
Pair Corralation between American Funds and Sierra Core
Assuming the 90 days horizon American Funds Retirement is expected to generate 1.33 times more return on investment than Sierra Core. However, American Funds is 1.33 times more volatile than Sierra E Retirement. It trades about 0.08 of its potential returns per unit of risk. Sierra E Retirement is currently generating about 0.05 per unit of risk. If you would invest 1,077 in American Funds Retirement on October 19, 2024 and sell it today you would earn a total of 186.00 from holding American Funds Retirement or generate 17.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Sierra E Retirement
Performance |
| Timeline |
| American Funds Retirement |
| Sierra E Retirement |
American Funds and Sierra Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Sierra Core
The main advantage of trading using opposite American Funds and Sierra Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Sierra Core 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 Sierra Core will offset losses from the drop in Sierra Core's long position.| American Funds vs. Delaware Limited Term Diversified | American Funds vs. Lord Abbett Diversified | American Funds vs. Tax Managed Mid Small | American Funds vs. Fulcrum Diversified Absolute |
| Sierra Core vs. Stone Ridge Diversified | Sierra Core vs. Global Diversified Income | Sierra Core vs. Allianzgi Diversified Income | Sierra Core vs. Thrivent Diversified Income |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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