Correlation Between American Funds and Cliffwater Corporate
Can any of the company-specific risk be diversified away by investing in both American Funds and Cliffwater Corporate 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 Cliffwater Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2040 and Cliffwater Corporate Lending, you can compare the effects of market volatilities on American Funds and Cliffwater Corporate 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 Cliffwater Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Cliffwater Corporate.
Diversification Opportunities for American Funds and Cliffwater Corporate
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Cliffwater is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2040 and Cliffwater Corporate Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cliffwater Corporate 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 2040 are associated (or correlated) with Cliffwater Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cliffwater Corporate has no effect on the direction of American Funds i.e., American Funds and Cliffwater Corporate go up and down completely randomly.
Pair Corralation between American Funds and Cliffwater Corporate
Assuming the 90 days horizon American Funds 2040 is expected to generate 10.05 times more return on investment than Cliffwater Corporate. However, American Funds is 10.05 times more volatile than Cliffwater Corporate Lending. It trades about 0.11 of its potential returns per unit of risk. Cliffwater Corporate Lending is currently generating about 0.81 per unit of risk. If you would invest 2,141 in American Funds 2040 on September 20, 2024 and sell it today you would earn a total of 72.00 from holding American Funds 2040 or generate 3.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
American Funds 2040 vs. Cliffwater Corporate Lending
Performance |
Timeline |
American Funds 2040 |
Cliffwater Corporate |
American Funds and Cliffwater Corporate Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and Cliffwater Corporate
The main advantage of trading using opposite American Funds and Cliffwater Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Cliffwater Corporate 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 Cliffwater Corporate will offset losses from the drop in Cliffwater Corporate's long position.American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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