Correlation Between Smead Value and American Funds
Can any of the company-specific risk be diversified away by investing in both Smead Value 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 Smead Value and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smead Value Fund and American Funds American, you can compare the effects of market volatilities on Smead Value 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 Smead Value with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and American Funds.
Diversification Opportunities for Smead Value and American Funds
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Smead and American is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and American Funds American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds American and Smead Value 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 Smead Value Fund 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 American has no effect on the direction of Smead Value i.e., Smead Value and American Funds go up and down completely randomly.
Pair Corralation between Smead Value and American Funds
Assuming the 90 days horizon Smead Value is expected to generate 1.76 times less return on investment than American Funds. In addition to that, Smead Value is 1.48 times more volatile than American Funds American. It trades about 0.06 of its total potential returns per unit of risk. American Funds American is currently generating about 0.16 per unit of volatility. If you would invest 5,369 in American Funds American on September 5, 2024 and sell it today you would earn a total of 671.00 from holding American Funds American or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Smead Value Fund vs. American Funds American
Performance |
| Timeline |
| Smead Value Fund |
| American Funds American |
Smead Value and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smead Value and American Funds
The main advantage of trading using opposite Smead Value and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Value 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.| Smead Value vs. Neuberger Berman Large | Smead Value vs. Akre Focus Fund | Smead Value vs. Baron Partners Fund | Smead Value vs. Goldman Sachs Gqg |
| American Funds vs. Commonwealth Global Fund | American Funds vs. Alliancebernstein Global High | American Funds vs. Dreyfusstandish Global Fixed | American Funds vs. Legg Mason Global |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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