Correlation Between Stone Ridge and American Funds
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and American Funds Balanced, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and American Funds.
Diversification Opportunities for Stone Ridge and American Funds
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stone and American is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and American Funds Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Balanced and Stone Ridge 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 Stone Ridge Diversified 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 Balanced has no effect on the direction of Stone Ridge i.e., Stone Ridge and American Funds go up and down completely randomly.
Pair Corralation between Stone Ridge and American Funds
Assuming the 90 days horizon Stone Ridge is expected to generate 1.22 times less return on investment than American Funds. But when comparing it to its historical volatility, Stone Ridge Diversified is 2.01 times less risky than American Funds. It trades about 0.24 of its potential returns per unit of risk. American Funds Balanced is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,877 in American Funds Balanced on September 13, 2024 and sell it today you would earn a total of 20.00 from holding American Funds Balanced or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge Diversified vs. American Funds Balanced
Performance |
| Timeline |
| Stone Ridge Diversified |
| American Funds Balanced |
Stone Ridge and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and American Funds
The main advantage of trading using opposite Stone Ridge and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Touchstone Premium Yield | Stone Ridge vs. Dws Government Money | Stone Ridge vs. Alliancebernstein National Municipal | Stone Ridge vs. T Rowe Price |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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