Correlation Between Victory Sophus and American Funds

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

By analyzing existing cross correlation between Victory Sophus Emerging and American Funds New, you can compare the effects of market volatilities on Victory Sophus 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 Victory Sophus with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Sophus and American Funds.

Diversification Opportunities for Victory Sophus and American Funds

0.93

Correlation Coefficient

Victory Sophus  American Funds

Almost no diversification

The 3 months correlation between Victory and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Victory Sophus Emerging and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New and Victory Sophus 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 Victory Sophus Emerging 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 New has no effect on the direction of Victory Sophus i.e., Victory Sophus and American Funds go up and down completely randomly.

Pair Corralation between Victory Sophus and American Funds

Assuming the 90 days horizon Victory Sophus Emerging is expected to under-perform the American Funds. In addition to that, Victory Sophus is 1.26 times more volatile than American Funds New. It trades about -0.12 of its total potential returns per unit of risk. American Funds New is currently generating about -0.11 per unit of volatility. If you would invest  8,515  in American Funds New on September 12, 2024 and sell it today you would lose (263.00) from holding American Funds New or give up 3.09% of portfolio value over 90 days.

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

Victory Sophus Emerging  vs.  American Funds New

Victory Sophus Emerging

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Sophus Emerging are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Victory Sophus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds New

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds New are ranked lower than 3 (%) 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.

Pair Trading with Victory Sophus and American Funds

The main advantage of trading using opposite Victory Sophus and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory Sophus 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 Victory Sophus Emerging and American Funds New 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.