Correlation Between Commodities Strategy and American Funds

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

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

Diversification Opportunities for Commodities Strategy and American Funds

0.56

Correlation Coefficient

Commodities Strategy  American Funds

Very weak diversification

The 3 months correlation between Commodities and American is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement and Commodities Strategy 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 Commodities Strategy Fund 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 Retirement has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and American Funds go up and down completely randomly.

Pair Corralation between Commodities Strategy and American Funds

Assuming the 90 days horizon Commodities Strategy Fund is expected to under-perform the American Funds. In addition to that, Commodities Strategy is 2.19 times more volatile than American Funds Retirement. It trades about -0.02 of its total potential returns per unit of risk. American Funds Retirement is currently generating about 0.03 per unit of volatility. If you would invest  1,176  in American Funds Retirement on January 29, 2024 and sell it today you would earn a total of  114.00  from holding American Funds Retirement or generate 9.69% return on investment over 90 days.

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

Commodities Strategy Fund  vs.  American Funds Retirement

Commodities Strategy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commodities Strategy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Commodities Strategy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

American Funds Retirement

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 4 (%) 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 Commodities Strategy and American Funds

The main advantage of trading using opposite Commodities Strategy and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy 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 Commodities Strategy Fund and American Funds Retirement 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.