Correlation Between Heritage Fund and American Funds

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

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

Diversification Opportunities for Heritage Fund and American Funds

0.93

Correlation Coefficient

Heritage Fund  American Funds

Almost no diversification

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

Pair Corralation between Heritage Fund and American Funds

Assuming the 90 days horizon Heritage Fund Investor is expected to generate 1.26 times more return on investment than American Funds. However, Heritage Fund is 1.26 times more volatile than American Funds Amcap. It trades about 0.29 of its potential returns per unit of risk. American Funds Amcap is currently generating about 0.17 per unit of risk. If you would invest  2,449  in Heritage Fund Investor on September 12, 2024 and sell it today you would earn a total of  463.00  from holding Heritage Fund Investor or generate 18.91% return on investment over 90 days.

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

Heritage Fund Investor  vs.  American Funds Amcap

Heritage Fund Investor

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Fund Investor are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Heritage Fund showed solid returns over the last few months and may actually be approaching a breakup point.

American Funds Amcap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Amcap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Heritage Fund and American Funds

The main advantage of trading using opposite Heritage Fund and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Fund 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 Heritage Fund Investor and American Funds Amcap 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 Stocks Directory module to find actively traded stocks across global markets.