Correlation Between Energy Basic and American Funds
Can any of the company-specific risk be diversified away by investing in both Energy Basic 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 Energy Basic and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and American Funds 2015, you can compare the effects of market volatilities on Energy Basic 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 Energy Basic with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and American Funds.
Diversification Opportunities for Energy Basic and American Funds
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and American Funds 2015 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2015 and Energy Basic 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 Energy Basic Materials 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 2015 has no effect on the direction of Energy Basic i.e., Energy Basic and American Funds go up and down completely randomly.
Pair Corralation between Energy Basic and American Funds
Assuming the 90 days horizon Energy Basic Materials is expected to generate 2.65 times more return on investment than American Funds. However, Energy Basic is 2.65 times more volatile than American Funds 2015. It trades about 0.1 of its potential returns per unit of risk. American Funds 2015 is currently generating about 0.11 per unit of risk. If you would invest 1,248 in Energy Basic Materials on August 31, 2024 and sell it today you would earn a total of 23.00 from holding Energy Basic Materials or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. American Funds 2015
Performance |
| Timeline |
| Energy Basic Materials |
| American Funds 2015 |
Energy Basic and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and American Funds
The main advantage of trading using opposite Energy Basic and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic 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.| Energy Basic vs. Aqr Large Cap | Energy Basic vs. Tax Managed Large Cap | Energy Basic vs. T Rowe Price | Energy Basic vs. Dana Large Cap |
| American Funds vs. Fidelity Freedom 2015 | American Funds vs. T Rowe Price | American Funds vs. T Rowe Price | American Funds vs. Fidelity Freedom 2015 |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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