Correlation Between Amcap Fund and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Amcap Fund and Smallcap World 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 Amcap Fund and Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amcap Fund Class and Smallcap World Fund, you can compare the effects of market volatilities on Amcap Fund and Smallcap World 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 Amcap Fund with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Smallcap World.
Diversification Opportunities for Amcap Fund and Smallcap World
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Amcap and Smallcap is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Amcap Fund 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 Amcap Fund Class are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Amcap Fund i.e., Amcap Fund and Smallcap World go up and down completely randomly.
Pair Corralation between Amcap Fund and Smallcap World
Assuming the 90 days horizon Amcap Fund is expected to generate 1.45 times less return on investment than Smallcap World. In addition to that, Amcap Fund is 1.25 times more volatile than Smallcap World Fund. It trades about 0.03 of its total potential returns per unit of risk. Smallcap World Fund is currently generating about 0.06 per unit of volatility. If you would invest 6,548 in Smallcap World Fund on March 3, 2025 and sell it today you would earn a total of 348.00 from holding Smallcap World Fund or generate 5.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Amcap Fund Class vs. Smallcap World Fund
Performance |
Timeline |
Amcap Fund Class |
Smallcap World |
Amcap Fund and Smallcap World Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amcap Fund and Smallcap World
The main advantage of trading using opposite Amcap Fund and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.Amcap Fund vs. Europacific Growth Fund | Amcap Fund vs. Capital World Growth | Amcap Fund vs. Washington Mutual Investors | Amcap Fund vs. American Mutual Fund |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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