Correlation Between American Funds and Pax E

Can any of the company-specific risk be diversified away by investing in both American Funds and Pax E 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 Pax E 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 Pax E Bond, you can compare the effects of market volatilities on American Funds and Pax E 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 Pax E. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Pax E.

Diversification Opportunities for American Funds and Pax E

0.86

Correlation Coefficient

American Funds  Pax E

Very poor diversification

The 3 months correlation between American and Pax is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Pax E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax E Bond 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 Pax E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax E Bond has no effect on the direction of American Funds i.e., American Funds and Pax E go up and down completely randomly.

Pair Corralation between American Funds and Pax E

Assuming the 90 days horizon American Funds The is expected to generate 1.01 times more return on investment than Pax E. However, American Funds is 1.01 times more volatile than Pax E Bond. It trades about 0.05 of its potential returns per unit of risk. Pax E Bond is currently generating about 0.04 per unit of risk. If you would invest  1,109  in American Funds The on October 27, 2024 and sell it today you would earn a total of  3.00  from holding American Funds The or generate 0.27% return on investment over 90 days.

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

American Funds The  vs.  Pax E Bond

American Funds

Risk-Adjusted Performance

0 of 100

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 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.

Pax E Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pax E Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Pax E 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 Pax E

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

The idea behind American Funds The and Pax E Bond 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.