Correlation Between Snap and American Funds
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and American Funds 2050, you can compare the effects of market volatilities on Snap 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 Snap with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and American Funds.
Diversification Opportunities for Snap and American Funds
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and American Funds 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2050 and Snap 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 Snap Inc 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 2050 has no effect on the direction of Snap i.e., Snap and American Funds go up and down completely randomly.
Pair Corralation between Snap and American Funds
Given the investment horizon of 90 days Snap Inc is expected to generate 7.21 times more return on investment than American Funds. However, Snap is 7.21 times more volatile than American Funds 2050. It trades about 0.1 of its potential returns per unit of risk. American Funds 2050 is currently generating about 0.05 per unit of risk. If you would invest 1,071 in Snap Inc on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Snap Inc or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. American Funds 2050
Performance |
| Timeline |
| Snap Inc |
| American Funds 2050 |
Snap and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and American Funds
The main advantage of trading using opposite Snap and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and American Funds 2050 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| American Funds vs. Commonwealth Global Fund | American Funds vs. Nuveen Global Real | American Funds vs. Scharf Global Opportunity | American Funds vs. Ms Global Fixed |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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