Correlation Between Amcap Fund and Df Dent

Can any of the company-specific risk be diversified away by investing in both Amcap Fund and Df Dent 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 Df Dent 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 Df Dent Premier, you can compare the effects of market volatilities on Amcap Fund and Df Dent 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 Df Dent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Df Dent.

Diversification Opportunities for Amcap Fund and Df Dent

0.62

Correlation Coefficient

Amcap Fund  Df Dent

Poor diversification

The 3 months correlation between Amcap and DFDPX is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Df Dent Premier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Df Dent Premier 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 Df Dent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Df Dent Premier has no effect on the direction of Amcap Fund i.e., Amcap Fund and Df Dent go up and down completely randomly.

Pair Corralation between Amcap Fund and Df Dent

Assuming the 90 days horizon Amcap Fund Class is expected to generate 0.46 times more return on investment than Df Dent. However, Amcap Fund Class is 2.19 times less risky than Df Dent. It trades about 0.17 of its potential returns per unit of risk. Df Dent Premier is currently generating about -0.07 per unit of risk. If you would invest  4,336  in Amcap Fund Class on September 13, 2024 and sell it today you would earn a total of  355.00  from holding Amcap Fund Class or generate 8.19% return on investment over 90 days.

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

Amcap Fund Class  vs.  Df Dent Premier

Amcap Fund Class

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amcap Fund Class are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Amcap Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Df Dent Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Df Dent Premier has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Amcap Fund and Df Dent

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

The idea behind Amcap Fund Class and Df Dent Premier 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.