Correlation Between American Funds and Sprucegrove International

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

By analyzing existing cross correlation between American Funds 2065 and Sprucegrove International Equity, you can compare the effects of market volatilities on American Funds and Sprucegrove International 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 American Funds with a short position of Sprucegrove International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Sprucegrove International.

Diversification Opportunities for American Funds and Sprucegrove International

-0.36

Correlation Coefficient

American Funds  Sprucegrove International

Very good diversification

The 3 months correlation between American and Sprucegrove is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2065 and Sprucegrove International Equi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprucegrove International and American Funds 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 American Funds 2065 are associated (or correlated) with Sprucegrove International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprucegrove International has no effect on the direction of American Funds i.e., American Funds and Sprucegrove International go up and down completely randomly.

Pair Corralation between American Funds and Sprucegrove International

Assuming the 90 days horizon American Funds 2065 is expected to generate 0.75 times more return on investment than Sprucegrove International. However, American Funds 2065 is 1.34 times less risky than Sprucegrove International. It trades about 0.15 of its potential returns per unit of risk. Sprucegrove International Equity is currently generating about -0.1 per unit of risk. If you would invest  1,754  in American Funds 2065 on September 18, 2024 and sell it today you would earn a total of  94.00  from holding American Funds 2065 or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Funds 2065  vs.  Sprucegrove International Equi

American Funds 2065

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2065 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. 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.

Sprucegrove International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Funds and Sprucegrove International

The main advantage of trading using opposite American Funds and Sprucegrove International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Sprucegrove International 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 Sprucegrove International will offset losses from the drop in Sprucegrove International's long position.

The idea behind American Funds 2065 and Sprucegrove International Equity 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.