Correlation Between Easterly Snow and American Funds

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

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

Diversification Opportunities for Easterly Snow and American Funds

0.49

Correlation Coefficient

Easterly Snow  American Funds

Very weak diversification

The 3 months correlation between Easterly and American is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Easterly Snow Longshort and American Funds Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Income and Easterly Snow 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 Easterly Snow Longshort 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 Income has no effect on the direction of Easterly Snow i.e., Easterly Snow and American Funds go up and down completely randomly.

Pair Corralation between Easterly Snow and American Funds

Assuming the 90 days horizon Easterly Snow Longshort is expected to under-perform the American Funds. In addition to that, Easterly Snow is 2.8 times more volatile than American Funds Income. It trades about -0.08 of its total potential returns per unit of risk. American Funds Income is currently generating about -0.05 per unit of volatility. If you would invest  1,369  in American Funds Income on September 28, 2024 and sell it today you would lose (17.00) from holding American Funds Income or give up 1.24% of portfolio value over 90 days.

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

Easterly Snow Longshort  vs.  American Funds Income

Easterly Snow Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Easterly Snow Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Easterly Snow is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental 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 Easterly Snow and American Funds

The main advantage of trading using opposite Easterly Snow and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Easterly Snow 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 Easterly Snow Longshort and American Funds Income 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.