Correlation Between American Funds and Sextant E

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

By analyzing existing cross correlation between American Funds Tax Advantaged and Sextant E Fund, you can compare the effects of market volatilities on American Funds and Sextant E 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 Sextant E. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Sextant E.

Diversification Opportunities for American Funds and Sextant E

0.94

Correlation Coefficient

American Funds  Sextant E

Almost no diversification

The 3 months correlation between American and Sextant is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Tax Advantaged and Sextant E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant E Fund 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 Tax Advantaged are associated (or correlated) with Sextant E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant E Fund has no effect on the direction of American Funds i.e., American Funds and Sextant E go up and down completely randomly.

Pair Corralation between American Funds and Sextant E

Assuming the 90 days horizon American Funds Tax Advantaged is expected to generate 0.8 times more return on investment than Sextant E. However, American Funds Tax Advantaged is 1.25 times less risky than Sextant E. It trades about 0.05 of its potential returns per unit of risk. Sextant E Fund is currently generating about 0.04 per unit of risk. If you would invest  1,634  in American Funds Tax Advantaged on September 14, 2024 and sell it today you would earn a total of  14.00  from holding American Funds Tax Advantaged or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

American Funds Tax Advantaged  vs.  Sextant E Fund

American Funds Tax

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Tax Advantaged are ranked lower than 3 (%) 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.

Sextant E Fund

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sextant E Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sextant E 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 Sextant E

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

The idea behind American Funds Tax Advantaged and Sextant E Fund 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.