Correlation Between American Funds and Wilmington Trust

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

Diversification Opportunities for American Funds and Wilmington Trust

0.38

Correlation Coefficient

American Funds  Wilmington Trust

Weak diversification

The 3 months correlation between American and Wilmington is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Wilmington Trust Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Trust Ret 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 Wilmington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Trust Ret has no effect on the direction of American Funds i.e., American Funds and Wilmington Trust go up and down completely randomly.

Pair Corralation between American Funds and Wilmington Trust

Assuming the 90 days horizon American Funds Retirement is expected to generate 0.59 times more return on investment than Wilmington Trust. However, American Funds Retirement is 1.71 times less risky than Wilmington Trust. It trades about -0.25 of its potential returns per unit of risk. Wilmington Trust Retirement is currently generating about -0.25 per unit of risk. If you would invest  1,290  in American Funds Retirement on October 9, 2024 and sell it today you would lose (39.00) from holding American Funds Retirement or give up 3.02% of portfolio value over 90 days.

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

American Funds Retirement  vs.  Wilmington Trust Retirement

American Funds Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds Retirement 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.

Wilmington Trust Ret

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmington Trust Retirement are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wilmington Trust 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 Wilmington Trust

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

The idea behind American Funds Retirement and Wilmington Trust Retirement 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.