Correlation Between Qs Us and American Funds

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Can any of the company-specific risk be diversified away by investing in both Qs Us and American Funds 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 Qs Us and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qs Small Capitalization and American Funds Fundamental, you can compare the effects of market volatilities on Qs Us and American Funds 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 Qs Us with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qs Us and American Funds.

Diversification Opportunities for Qs Us and American Funds

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between LMBMX and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Qs Small Capitalization and American Funds Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Funda and Qs Us 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 Qs Small Capitalization are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Funda has no effect on the direction of Qs Us i.e., Qs Us and American Funds go up and down completely randomly.

Pair Corralation between Qs Us and American Funds

Assuming the 90 days horizon Qs Small Capitalization is expected to generate 1.73 times more return on investment than American Funds. However, Qs Us is 1.73 times more volatile than American Funds Fundamental. It trades about 0.16 of its potential returns per unit of risk. American Funds Fundamental is currently generating about 0.22 per unit of risk. If you would invest  1,331  in Qs Small Capitalization on September 5, 2024 and sell it today you would earn a total of  174.00  from holding Qs Small Capitalization or generate 13.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Qs Small Capitalization  vs.  American Funds Fundamental

 Performance 
       Timeline  
Qs Small Capitalization 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Qs Small Capitalization are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Qs Us showed solid returns over the last few months and may actually be approaching a breakup point.
American Funds Funda 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Fundamental are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Qs Us and American Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Qs Us and American Funds

The main advantage of trading using opposite Qs Us and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Us position performs unexpectedly, American Funds 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 Funds will offset losses from the drop in American Funds' long position.
The idea behind Qs Small Capitalization and American Funds Fundamental 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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