Correlation Between American Funds and Quantified Managed

Can any of the company-specific risk be diversified away by investing in both American Funds and Quantified Managed 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 Quantified Managed 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 Quantified Managed Income, you can compare the effects of market volatilities on American Funds and Quantified Managed 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 Quantified Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Quantified Managed.

Diversification Opportunities for American Funds and Quantified Managed

0.48

Correlation Coefficient

American Funds  Quantified Managed

Very weak diversification

The 3 months correlation between American and Quantified is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Quantified Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantified Managed Income 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 Quantified Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantified Managed Income has no effect on the direction of American Funds i.e., American Funds and Quantified Managed go up and down completely randomly.

Pair Corralation between American Funds and Quantified Managed

Assuming the 90 days horizon American Funds Retirement is expected to generate 1.29 times more return on investment than Quantified Managed. However, American Funds is 1.29 times more volatile than Quantified Managed Income. It trades about 0.06 of its potential returns per unit of risk. Quantified Managed Income is currently generating about -0.04 per unit of risk. If you would invest  1,270  in American Funds Retirement on December 1, 2024 and sell it today you would earn a total of  21.00  from holding American Funds Retirement or generate 1.65% return on investment over 90 days.

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

American Funds Retirement  vs.  Quantified Managed Income

American Funds Retirement

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 4 (%) 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.

Quantified Managed Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quantified Managed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Quantified Managed 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 Quantified Managed

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

The idea behind American Funds Retirement and Quantified Managed Income 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.