Correlation Between American Fds and Smallcap World
Can any of the company-specific risk be diversified away by investing in both American Fds and Smallcap World 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 Smallcap World 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 Smallcap World Fund, you can compare the effects of market volatilities on American Fds and Smallcap World 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 Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Fds and Smallcap World.
Diversification Opportunities for American Fds and Smallcap World
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Smallcap is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding American Fds Smallcap and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World 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 Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of American Fds i.e., American Fds and Smallcap World go up and down completely randomly.
Pair Corralation between American Fds and Smallcap World
Assuming the 90 days horizon American Fds Smallcap is expected to under-perform the Smallcap World. In addition to that, American Fds is 1.0 times more volatile than Smallcap World Fund. It trades about -0.11 of its total potential returns per unit of risk. Smallcap World Fund is currently generating about -0.1 per unit of volatility. If you would invest 7,283 in Smallcap World Fund on November 27, 2024 and sell it today you would lose (380.00) from holding Smallcap World Fund or give up 5.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Fds Smallcap vs. Smallcap World Fund
Performance |
| Timeline |
| American Fds Smallcap |
| Smallcap World |
American Fds and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Fds and Smallcap World
The main advantage of trading using opposite American Fds and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Fds position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.| American Fds vs. Putnam Global Health | American Fds vs. Schwab Health Care | American Fds vs. Deutsche Health And | American Fds vs. Tekla Healthcare Investors |
| Smallcap World vs. Small Pany Growth | Smallcap World vs. Champlain Small | Smallcap World vs. Ashmore Emerging Markets | Smallcap World vs. Rbc Small Cap |
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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