Correlation Between American Funds and Vy(r) Clarion

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

By analyzing existing cross correlation between American Funds Balanced and Vy Clarion Real, you can compare the effects of market volatilities on American Funds and Vy(r) Clarion 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 Vy(r) Clarion. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Vy(r) Clarion.

Diversification Opportunities for American Funds and Vy(r) Clarion

0.57

Correlation Coefficient

American Funds  Vy(r) Clarion

Very weak diversification

The 3 months correlation between American and Vy(r) is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Balanced and Vy Clarion Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vy Clarion Real 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 Balanced are associated (or correlated) with Vy(r) Clarion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vy Clarion Real has no effect on the direction of American Funds i.e., American Funds and Vy(r) Clarion go up and down completely randomly.

Pair Corralation between American Funds and Vy(r) Clarion

Assuming the 90 days horizon American Funds Balanced is expected to generate 0.47 times more return on investment than Vy(r) Clarion. However, American Funds Balanced is 2.11 times less risky than Vy(r) Clarion. It trades about 0.07 of its potential returns per unit of risk. Vy Clarion Real is currently generating about 0.03 per unit of risk. If you would invest  1,509  in American Funds Balanced on October 4, 2024 and sell it today you would earn a total of  301.00  from holding American Funds Balanced or generate 19.95% return on investment over 90 days.

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

American Funds Balanced  vs.  Vy Clarion Real

American Funds Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vy Clarion Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vy Clarion Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vy(r) Clarion is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Funds and Vy(r) Clarion

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

The idea behind American Funds Balanced and Vy Clarion Real 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.