Correlation Between American Funds and American High
Can any of the company-specific risk be diversified away by investing in both American Funds and American High 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 American High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2015 and American High Income Municipal, you can compare the effects of market volatilities on American Funds and American High 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 American High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and American High.
Diversification Opportunities for American Funds and American High
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2015 and American High Income Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High Me 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 2015 are associated (or correlated) with American High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Me has no effect on the direction of American Funds i.e., American Funds and American High go up and down completely randomly.
Pair Corralation between American Funds and American High
Assuming the 90 days horizon American Funds 2015 is expected to generate 1.69 times more return on investment than American High. However, American Funds is 1.69 times more volatile than American High Income Municipal. It trades about -0.2 of its potential returns per unit of risk. American High Income Municipal is currently generating about -0.35 per unit of risk. If you would invest 1,230 in American Funds 2015 on January 30, 2024 and sell it today you would lose (19.00) from holding American Funds 2015 or give up 1.54% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
American Funds 2015 vs. American High Income Municipal
Performance |
Timeline |
American Funds 2015 |
American High Me |
American Funds and American High Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and American High
The main advantage of trading using opposite American Funds and American High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, American High 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 High will offset losses from the drop in American High's long position.American Funds vs. Msift High Yield | American Funds vs. Alpine High Yield | American Funds vs. Blackrock High Yield | American Funds vs. Neuberger Berman Income |
American High vs. American High Income Municipal | American High vs. American High Income Municipal | American High vs. Goldman Sachs High |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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