Correlation Between First American and Americafirst Income
Can any of the company-specific risk be diversified away by investing in both First American and Americafirst 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 First American and Americafirst Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Funds and Americafirst Income Fund, you can compare the effects of market volatilities on First American and Americafirst 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 First American with a short position of Americafirst Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Americafirst Income.
Diversification Opportunities for First American and Americafirst Income
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Americafirst is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and Americafirst Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americafirst Income and First American 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 First American Funds are associated (or correlated) with Americafirst Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americafirst Income has no effect on the direction of First American i.e., First American and Americafirst Income go up and down completely randomly.
Pair Corralation between First American and Americafirst Income
Assuming the 90 days horizon First American is expected to generate 6.36 times less return on investment than Americafirst Income. But when comparing it to its historical volatility, First American Funds is 5.22 times less risky than Americafirst Income. It trades about 0.13 of its potential returns per unit of risk. Americafirst Income Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 456.00 in Americafirst Income Fund on September 6, 2024 and sell it today you would earn a total of 30.00 from holding Americafirst Income Fund or generate 6.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
First American Funds vs. Americafirst Income Fund
Performance |
Timeline |
First American Funds |
Americafirst Income |
First American and Americafirst Income Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First American and Americafirst Income
The main advantage of trading using opposite First American and Americafirst Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, Americafirst 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 Americafirst Income will offset losses from the drop in Americafirst Income's long position.First American vs. Touchstone Premium Yield | First American vs. Versatile Bond Portfolio | First American vs. California Bond Fund | First American vs. Gmo High Yield |
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Check out your portfolio center.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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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