Correlation Between Amcap Fund and Enhanced Fixed

Can any of the company-specific risk be diversified away by investing in both Amcap Fund and Enhanced Fixed 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 Amcap Fund and Enhanced Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amcap Fund Class and Enhanced Fixed Income, you can compare the effects of market volatilities on Amcap Fund and Enhanced Fixed 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 Amcap Fund with a short position of Enhanced Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Enhanced Fixed.

Diversification Opportunities for Amcap Fund and Enhanced Fixed

-0.12

Correlation Coefficient

Amcap Fund  Enhanced Fixed

Good diversification

The 3 months correlation between Amcap and Enhanced is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Enhanced Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhanced Fixed Income and Amcap Fund 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 Amcap Fund Class are associated (or correlated) with Enhanced Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhanced Fixed Income has no effect on the direction of Amcap Fund i.e., Amcap Fund and Enhanced Fixed go up and down completely randomly.

Pair Corralation between Amcap Fund and Enhanced Fixed

Assuming the 90 days horizon Amcap Fund Class is expected to under-perform the Enhanced Fixed. In addition to that, Amcap Fund is 3.8 times more volatile than Enhanced Fixed Income. It trades about -0.07 of its total potential returns per unit of risk. Enhanced Fixed Income is currently generating about 0.13 per unit of volatility. If you would invest  994.00  in Enhanced Fixed Income on December 20, 2024 and sell it today you would earn a total of  22.00  from holding Enhanced Fixed Income or generate 2.21% return on investment over 90 days.

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

Amcap Fund Class  vs.  Enhanced Fixed Income

Amcap Fund Class

Risk-Adjusted Performance

Very Weak

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

Enhanced Fixed Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Fixed Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Enhanced Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amcap Fund and Enhanced Fixed

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

The idea behind Amcap Fund Class and Enhanced Fixed Income 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 Valuation module to check real value of public entities based on technical and fundamental data.