Correlation Between American Funds and Federated Prudent

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

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

Diversification Opportunities for American Funds and Federated Prudent

0.0

Correlation Coefficient

American Funds  Federated Prudent

Pay attention - limited upside

The 3 months correlation between American and Federated is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Government and Federated Prudent Bear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Prudent Bear 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 Government are associated (or correlated) with Federated Prudent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Prudent Bear has no effect on the direction of American Funds i.e., American Funds and Federated Prudent go up and down completely randomly.

Pair Corralation between American Funds and Federated Prudent

If you would invest  100.00  in American Funds Government on October 9, 2024 and sell it today you would earn a total of  0.00  from holding American Funds Government or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

American Funds Government  vs.  Federated Prudent Bear

American Funds Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds Government 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.

Federated Prudent Bear

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Funds and Federated Prudent

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

The idea behind American Funds Government and Federated Prudent Bear 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.