Correlation Between Absolute Capital and American Funds

Can any of the company-specific risk be diversified away by investing in both Absolute Capital 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 Absolute Capital and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Absolute Capital Asset and American Funds Government, you can compare the effects of market volatilities on Absolute Capital 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 Absolute Capital with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Capital and American Funds.

Diversification Opportunities for Absolute Capital and American Funds

0.0

Correlation Coefficient

Absolute Capital  American Funds

Pay attention - limited upside

The 3 months correlation between Absolute and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Capital Asset and American Funds Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Government and Absolute Capital 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 Absolute Capital Asset 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 Government has no effect on the direction of Absolute Capital i.e., Absolute Capital and American Funds go up and down completely randomly.

Pair Corralation between Absolute Capital and American Funds

If you would invest  100.00  in American Funds Government on October 10, 2024 and sell it today you would earn a total of  0.00  from holding American Funds Government or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Absolute Capital Asset  vs.  American Funds Government

Absolute Capital Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Capital Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absolute Capital and American Funds

The main advantage of trading using opposite Absolute Capital and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Capital 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 Absolute Capital Asset and American Funds Government 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.