Correlation Between American Funds and American Growth

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

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

Diversification Opportunities for American Funds and American Growth

0.53

Correlation Coefficient

American Funds  American Growth

Very weak diversification

The 3 months correlation between American and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and American Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Growth 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 The are associated (or correlated) with American Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Growth has no effect on the direction of American Funds i.e., American Funds and American Growth go up and down completely randomly.

Pair Corralation between American Funds and American Growth

Assuming the 90 days horizon American Funds The is expected to generate 1.07 times more return on investment than American Growth. However, American Funds is 1.07 times more volatile than American Growth Fund. It trades about -0.08 of its potential returns per unit of risk. American Growth Fund is currently generating about -0.2 per unit of risk. If you would invest  8,193  in American Funds The on November 28, 2024 and sell it today you would lose (680.00) from holding American Funds The or give up 8.3% of portfolio value over 90 days.

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

American Funds The  vs.  American Growth Fund

American Funds

Risk-Adjusted Performance

Very Weak

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

American Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with American Funds and American Growth

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

The idea behind American Funds The and American Growth 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.