Correlation Between Smallcap World and American Fds
Can any of the company-specific risk be diversified away by investing in both Smallcap World and American Fds 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 Smallcap World and American Fds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and American Fds Smallcap, you can compare the effects of market volatilities on Smallcap World and American Fds 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 Smallcap World with a short position of American Fds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and American Fds.
Diversification Opportunities for Smallcap World and American Fds
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and American Fds Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Fds Smallcap and Smallcap World 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 Smallcap World Fund are associated (or correlated) with American Fds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Fds Smallcap has no effect on the direction of Smallcap World i.e., Smallcap World and American Fds go up and down completely randomly.
Pair Corralation between Smallcap World and American Fds
Assuming the 90 days horizon Smallcap World is expected to generate 1.85 times less return on investment than American Fds. In addition to that, Smallcap World is 1.08 times more volatile than American Fds Smallcap. It trades about 0.08 of its total potential returns per unit of risk. American Fds Smallcap is currently generating about 0.16 per unit of volatility. If you would invest 5,616 in American Fds Smallcap on August 28, 2024 and sell it today you would earn a total of 175.00 from holding American Fds Smallcap or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. American Fds Smallcap
Performance |
| Timeline |
| Smallcap World |
| American Fds Smallcap |
Smallcap World and American Fds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and American Fds
The main advantage of trading using opposite Smallcap World and American Fds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, American Fds 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 Fds will offset losses from the drop in American Fds' long position.| Smallcap World vs. Income Fund Of | Smallcap World vs. New World Fund | Smallcap World vs. American Mutual Fund | Smallcap World vs. American Mutual Fund |
| American Fds vs. Income Fund Of | American Fds vs. New World Fund | American Fds vs. American Mutual Fund | American Fds vs. American Mutual Fund |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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