Correlation Between Amcap Fund and Guidepath(r) Absolute

Can any of the company-specific risk be diversified away by investing in both Amcap Fund and Guidepath(r) Absolute 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 Guidepath(r) Absolute 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 Guidepath Absolute Return, you can compare the effects of market volatilities on Amcap Fund and Guidepath(r) Absolute 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 Guidepath(r) Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Guidepath(r) Absolute.

Diversification Opportunities for Amcap Fund and Guidepath(r) Absolute

0.9

Correlation Coefficient

Amcap Fund  Guidepath(r) Absolute

Almost no diversification

The 3 months correlation between Amcap and Guidepath(r) is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Guidepath Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Absolute Return 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 Guidepath(r) Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Absolute Return has no effect on the direction of Amcap Fund i.e., Amcap Fund and Guidepath(r) Absolute go up and down completely randomly.

Pair Corralation between Amcap Fund and Guidepath(r) Absolute

Assuming the 90 days horizon Amcap Fund Class is expected to generate 4.76 times more return on investment than Guidepath(r) Absolute. However, Amcap Fund is 4.76 times more volatile than Guidepath Absolute Return. It trades about 0.35 of its potential returns per unit of risk. Guidepath Absolute Return is currently generating about 0.2 per unit of risk. If you would invest  2,930  in Amcap Fund Class on April 23, 2025 and sell it today you would earn a total of  604.00  from holding Amcap Fund Class or generate 20.61% 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.  Guidepath Absolute Return

Amcap Fund Class

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Amcap Fund Class are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Amcap Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Guidepath Absolute Return

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guidepath Absolute Return are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guidepath(r) Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amcap Fund and Guidepath(r) Absolute

The main advantage of trading using opposite Amcap Fund and Guidepath(r) Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, Guidepath(r) Absolute 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 Guidepath(r) Absolute will offset losses from the drop in Guidepath(r) Absolute's long position.

The idea behind Amcap Fund Class and Guidepath Absolute Return 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.