Correlation Between American Funds and Api Growth
Can any of the company-specific risk be diversified away by investing in both American Funds and Api 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 Api Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Smallcap and Api Growth Fund, you can compare the effects of market volatilities on American Funds and Api 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 Api Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Api Growth.
Diversification Opportunities for American Funds and Api Growth
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Api is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Smallcap and Api Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Api Growth Fund 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 Smallcap are associated (or correlated) with Api Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Api Growth Fund has no effect on the direction of American Funds i.e., American Funds and Api Growth go up and down completely randomly.
Pair Corralation between American Funds and Api Growth
Assuming the 90 days horizon American Funds is expected to generate 4.93 times less return on investment than Api Growth. But when comparing it to its historical volatility, American Funds Smallcap is 1.05 times less risky than Api Growth. It trades about 0.05 of its potential returns per unit of risk. Api Growth Fund is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,986 in Api Growth Fund on October 23, 2024 and sell it today you would earn a total of 68.00 from holding Api Growth Fund or generate 3.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Funds Smallcap vs. Api Growth Fund
Performance |
Timeline |
American Funds Smallcap |
Api Growth Fund |
American Funds and Api Growth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and Api Growth
The main advantage of trading using opposite American Funds and Api Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Api 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 Api Growth will offset losses from the drop in Api Growth's long position.American Funds vs. New World Fund | American Funds vs. Washington Mutual Investors | American Funds vs. Europacific Growth Fund | American Funds vs. New Perspective Fund |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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