Correlation Between American Funds and William Blair

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

By analyzing existing cross correlation between American Funds 2015 and William Blair Small, you can compare the effects of market volatilities on American Funds and William Blair 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 William Blair. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and William Blair.

Diversification Opportunities for American Funds and William Blair

-0.22

Correlation Coefficient

American Funds  William Blair

Very good diversification

The 3 months correlation between American and William is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2015 and William Blair Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Blair Small 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 2015 are associated (or correlated) with William Blair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Blair Small has no effect on the direction of American Funds i.e., American Funds and William Blair go up and down completely randomly.

Pair Corralation between American Funds and William Blair

Assuming the 90 days horizon American Funds 2015 is expected to generate 0.32 times more return on investment than William Blair. However, American Funds 2015 is 3.1 times less risky than William Blair. It trades about 0.1 of its potential returns per unit of risk. William Blair Small is currently generating about -0.09 per unit of risk. If you would invest  1,226  in American Funds 2015 on December 29, 2024 and sell it today you would earn a total of  26.00  from holding American Funds 2015 or generate 2.12% return on investment over 90 days.

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

American Funds 2015  vs.  William Blair Small

American Funds 2015

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2015 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.

William Blair Small

Risk-Adjusted Performance

Very Weak

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

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

The idea behind American Funds 2015 and William Blair Small 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 Transaction History module to view history of all your transactions and understand their impact on performance.