Correlation Between Short-term Government and American Funds
Can any of the company-specific risk be diversified away by investing in both Short-term Government 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 Short-term Government and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and American Funds 2020, you can compare the effects of market volatilities on Short-term Government 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 Short-term Government with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and American Funds.
Diversification Opportunities for Short-term Government and American Funds
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Short-term and American is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and American Funds 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2020 and Short-term Government 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 Short Term Government 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 2020 has no effect on the direction of Short-term Government i.e., Short-term Government and American Funds go up and down completely randomly.
Pair Corralation between Short-term Government and American Funds
Assuming the 90 days horizon Short-term Government is expected to generate 267.0 times less return on investment than American Funds. But when comparing it to its historical volatility, Short Term Government Fund is 3.16 times less risky than American Funds. It trades about 0.0 of its potential returns per unit of risk. American Funds 2020 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,388 in American Funds 2020 on August 29, 2024 and sell it today you would earn a total of 8.00 from holding American Funds 2020 or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Short Term Government Fund vs. American Funds 2020
Performance |
| Timeline |
| Short Term Government |
| American Funds 2020 |
Short-term Government and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and American Funds
The main advantage of trading using opposite Short-term Government and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government 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.| Short-term Government vs. Vanguard Short Term Tax Exempt | Short-term Government vs. HUMANA INC | Short-term Government vs. Aquagold International | Short-term Government vs. Barloworld Ltd ADR |
| American Funds vs. Aig Government Money | American Funds vs. Short Term Government Fund | American Funds vs. Virtus Seix Government | American Funds vs. Us Government Securities |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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