Correlation Between American Funds and Berwyn Income

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

By analyzing existing cross correlation between American Funds Inflation and Berwyn Income Fund, you can compare the effects of market volatilities on American Funds and Berwyn Income 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 Berwyn Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Berwyn Income.

Diversification Opportunities for American Funds and Berwyn Income

0.44

Correlation Coefficient

American Funds  Berwyn Income

Very weak diversification

The 3 months correlation between American and Berwyn is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Berwyn Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berwyn Income 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 Inflation are associated (or correlated) with Berwyn Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berwyn Income has no effect on the direction of American Funds i.e., American Funds and Berwyn Income go up and down completely randomly.

Pair Corralation between American Funds and Berwyn Income

Assuming the 90 days horizon American Funds is expected to generate 2.38 times less return on investment than Berwyn Income. But when comparing it to its historical volatility, American Funds Inflation is 1.02 times less risky than Berwyn Income. It trades about 0.04 of its potential returns per unit of risk. Berwyn Income Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,204  in Berwyn Income Fund on September 12, 2024 and sell it today you would earn a total of  138.00  from holding Berwyn Income Fund or generate 11.46% return on investment over 90 days.

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

American Funds Inflation  vs.  Berwyn Income Fund

American Funds Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Berwyn Income

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Berwyn Income Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Berwyn Income 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 Berwyn Income

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

The idea behind American Funds Inflation and Berwyn Income Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.