Correlation Between Timothy Plan and American Funds
Can any of the company-specific risk be diversified away by investing in both Timothy Plan 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 Timothy Plan and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timothy Plan Growth and American Funds American, you can compare the effects of market volatilities on Timothy Plan 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 Timothy Plan with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timothy Plan and American Funds.
Diversification Opportunities for Timothy Plan and American Funds
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Timothy and American is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Plan Growth 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 Timothy Plan 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 Timothy Plan Growth 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 Timothy Plan i.e., Timothy Plan and American Funds go up and down completely randomly.
Pair Corralation between Timothy Plan and American Funds
Assuming the 90 days horizon Timothy Plan is expected to generate 3.01 times less return on investment than American Funds. But when comparing it to its historical volatility, Timothy Plan Growth is 1.25 times less risky than American Funds. It trades about 0.05 of its potential returns per unit of risk. American Funds American is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,000 in American Funds American on September 12, 2024 and sell it today you would earn a total of 702.00 from holding American Funds American or generate 23.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Timothy Plan Growth vs. American Funds American
Performance |
| Timeline |
| Timothy Plan Growth |
| American Funds American |
Timothy Plan and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timothy Plan and American Funds
The main advantage of trading using opposite Timothy Plan and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timothy Plan 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.| Timothy Plan vs. Strategic Allocation Servative | Timothy Plan vs. Strategic Allocation Aggressive | Timothy Plan vs. Value Fund Investor | Timothy Plan vs. International Growth Fund |
| American Funds vs. Scout Small Cap | American Funds vs. Lebenthal Lisanti Small | American Funds vs. Pace Smallmedium Value | American Funds vs. Glg Intl Small |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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