Correlation Between American Funds and Johnson Institutional

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

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

Diversification Opportunities for American Funds and Johnson Institutional

-0.45

Correlation Coefficient

American Funds  Johnson Institutional

Very good diversification

The 3 months correlation between American and Johnson is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Funds The and Johnson Institutional Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Institutional 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 The are associated (or correlated) with Johnson Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Institutional has no effect on the direction of American Funds i.e., American Funds and Johnson Institutional go up and down completely randomly.

Pair Corralation between American Funds and Johnson Institutional

Assuming the 90 days horizon American Funds The is expected to generate 7.36 times more return on investment than Johnson Institutional. However, American Funds is 7.36 times more volatile than Johnson Institutional Short. It trades about 0.11 of its potential returns per unit of risk. Johnson Institutional Short is currently generating about 0.11 per unit of risk. If you would invest  4,686  in American Funds The on September 5, 2024 and sell it today you would earn a total of  3,612  from holding American Funds The or generate 77.08% return on investment over 90 days.

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

American Funds The  vs.  Johnson Institutional Short

American Funds

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds The are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds showed solid returns over the last few months and may actually be approaching a breakup point.

Johnson Institutional

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Institutional Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Johnson Institutional 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 Johnson Institutional

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

The idea behind American Funds The and Johnson Institutional Short 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.