Correlation Between American Funds and 1290 Retirement

Can any of the company-specific risk be diversified away by investing in both American Funds and 1290 Retirement 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 1290 Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Funds 2035 and 1290 Retirement 2035, you can compare the effects of market volatilities on American Funds and 1290 Retirement 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 1290 Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and 1290 Retirement.

Diversification Opportunities for American Funds and 1290 Retirement

0.92

Correlation Coefficient

American Funds  1290 Retirement

Almost no diversification

The 3 months correlation between American and 1290 is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2035 and 1290 Retirement 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1290 Retirement 2035 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 2035 are associated (or correlated) with 1290 Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1290 Retirement 2035 has no effect on the direction of American Funds i.e., American Funds and 1290 Retirement go up and down completely randomly.

Pair Corralation between American Funds and 1290 Retirement

Assuming the 90 days horizon American Funds 2035 is expected to generate 1.14 times more return on investment than 1290 Retirement. However, American Funds is 1.14 times more volatile than 1290 Retirement 2035. It trades about 0.09 of its potential returns per unit of risk. 1290 Retirement 2035 is currently generating about 0.04 per unit of risk. If you would invest  1,972  in American Funds 2035 on September 16, 2024 and sell it today you would earn a total of  48.00  from holding American Funds 2035 or generate 2.43% return on investment over 90 days.

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

American Funds 2035  vs.  1290 Retirement 2035

American Funds 2035

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2035 are ranked lower than 7 (%) 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.

1290 Retirement 2035

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 1290 Retirement 2035 are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, 1290 Retirement 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 1290 Retirement

The main advantage of trading using opposite American Funds and 1290 Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, 1290 Retirement 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 1290 Retirement will offset losses from the drop in 1290 Retirement's long position.

The idea behind American Funds 2035 and 1290 Retirement 2035 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.