Correlation Between American Funds and Saat Defensive
Can any of the company-specific risk be diversified away by investing in both American Funds and Saat Defensive 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 Saat Defensive 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 Saat Defensive Strategy, you can compare the effects of market volatilities on American Funds and Saat Defensive 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 Saat Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Saat Defensive.
Diversification Opportunities for American Funds and Saat Defensive
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Saat is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Saat Defensive Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saat Defensive Strategy 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 Saat Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saat Defensive Strategy has no effect on the direction of American Funds i.e., American Funds and Saat Defensive go up and down completely randomly.
Pair Corralation between American Funds and Saat Defensive
Assuming the 90 days horizon American Funds Retirement is expected to generate 10.89 times more return on investment than Saat Defensive. However, American Funds is 10.89 times more volatile than Saat Defensive Strategy. It trades about 0.33 of its potential returns per unit of risk. Saat Defensive Strategy is currently generating about 0.62 per unit of risk. If you would invest 1,249 in American Funds Retirement on November 8, 2024 and sell it today you would earn a total of 38.00 from holding American Funds Retirement or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Funds Retirement vs. Saat Defensive Strategy
Performance |
| Timeline |
| American Funds Retirement |
| Saat Defensive Strategy |
American Funds and Saat Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Saat Defensive
The main advantage of trading using opposite American Funds and Saat Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Saat Defensive 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 Saat Defensive will offset losses from the drop in Saat Defensive's long position.| American Funds vs. Franklin Adjustable Government | American Funds vs. Us Government Securities | American Funds vs. Schwab Government Money | American Funds vs. Fidelity Series Government |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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