Correlation Between American Funds and Loomis Sayles

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

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

Diversification Opportunities for American Funds and Loomis Sayles

0.83

Correlation Coefficient

American Funds  Loomis Sayles

Very poor diversification

The 3 months correlation between American and Loomis is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Loomis Sayles Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loomis Sayles 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 Retirement are associated (or correlated) with Loomis Sayles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loomis Sayles Bond has no effect on the direction of American Funds i.e., American Funds and Loomis Sayles go up and down completely randomly.

Pair Corralation between American Funds and Loomis Sayles

Assuming the 90 days horizon American Funds Retirement is expected to generate 2.03 times more return on investment than Loomis Sayles. However, American Funds is 2.03 times more volatile than Loomis Sayles Bond. It trades about 0.11 of its potential returns per unit of risk. Loomis Sayles Bond is currently generating about 0.21 per unit of risk. If you would invest  1,246  in American Funds Retirement on December 22, 2024 and sell it today you would earn a total of  34.00  from holding American Funds Retirement or generate 2.73% return on investment over 90 days.

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

American Funds Retirement  vs.  Loomis Sayles Bond

American Funds Retirement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. 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.

Loomis Sayles Bond

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loomis Sayles Bond are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Loomis Sayles 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 Loomis Sayles

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

The idea behind American Funds Retirement and Loomis Sayles 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.