Correlation Between Growth And and American Funds

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

By analyzing existing cross correlation between Growth And Tax and American Funds Growth, you can compare the effects of market volatilities on Growth And and American Funds 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 Growth And with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth And and American Funds.

Diversification Opportunities for Growth And and American Funds

0.7

Correlation Coefficient

Growth And  American Funds

Poor diversification

The 3 months correlation between Growth and American is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Growth And Tax and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and Growth And 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 Growth And Tax are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Growth And i.e., Growth And and American Funds go up and down completely randomly.

Pair Corralation between Growth And and American Funds

Assuming the 90 days horizon Growth And Tax is expected to under-perform the American Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Growth And Tax is 1.3 times less risky than American Funds. The mutual fund trades about -0.06 of its potential returns per unit of risk. The American Funds Growth is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,911  in American Funds Growth on December 29, 2024 and sell it today you would lose (25.00) from holding American Funds Growth or give up 1.31% of portfolio value over 90 days.

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

Growth And Tax  vs.  American Funds Growth

Growth And Tax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Growth And Tax has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Growth And is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Funds Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Growth And and American Funds

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

The idea behind Growth And Tax and American Funds Growth 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.