Correlation Between American Fds and New Economy
Can any of the company-specific risk be diversified away by investing in both American Fds and New Economy 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 Fds and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Fds Smallcap and New Economy Fund, you can compare the effects of market volatilities on American Fds and New Economy 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 Fds with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Fds and New Economy.
Diversification Opportunities for American Fds and New Economy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and New is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Fds Smallcap and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and American Fds 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 Fds Smallcap are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of American Fds i.e., American Fds and New Economy go up and down completely randomly.
Pair Corralation between American Fds and New Economy
Assuming the 90 days horizon American Fds is expected to generate 1.95 times less return on investment than New Economy. But when comparing it to its historical volatility, American Fds Smallcap is 1.02 times less risky than New Economy. It trades about 0.05 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,359 in New Economy Fund on August 27, 2024 and sell it today you would earn a total of 2,254 from holding New Economy Fund or generate 51.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Fds Smallcap vs. New Economy Fund
Performance |
| Timeline |
| American Fds Smallcap |
| New Economy Fund |
American Fds and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Fds and New Economy
The main advantage of trading using opposite American Fds and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Fds position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| American Fds vs. Income Fund Of | American Fds vs. New World Fund | American Fds vs. American Mutual Fund | American Fds vs. American Mutual Fund |
| New Economy vs. Forum Real Estate | New Economy vs. Neuberger Berman Real | New Economy vs. Amg Managers Centersquare | New Economy vs. Commonwealth Real Estate |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |