Correlation Between Amcap Fund and Multisector Bond

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

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

Diversification Opportunities for Amcap Fund and Multisector Bond

0.96

Correlation Coefficient

Amcap Fund  Multisector Bond

Almost no diversification

The 3 months correlation between Amcap and Multisector is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Multisector Bond Sma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multisector Bond Sma and Amcap 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 Amcap Fund Class are associated (or correlated) with Multisector Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multisector Bond Sma has no effect on the direction of Amcap Fund i.e., Amcap Fund and Multisector Bond go up and down completely randomly.

Pair Corralation between Amcap Fund and Multisector Bond

Assuming the 90 days horizon Amcap Fund Class is expected to generate 2.77 times more return on investment than Multisector Bond. However, Amcap Fund is 2.77 times more volatile than Multisector Bond Sma. It trades about 0.33 of its potential returns per unit of risk. Multisector Bond Sma is currently generating about 0.18 per unit of risk. If you would invest  3,015  in Amcap Fund Class on April 28, 2025 and sell it today you would earn a total of  549.00  from holding Amcap Fund Class or generate 18.21% return on investment over 90 days.

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

Amcap Fund Class  vs.  Multisector Bond Sma

Amcap Fund Class

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amcap Fund Class are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Amcap Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Multisector Bond Sma

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multisector Bond Sma are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multisector Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amcap Fund and Multisector Bond

The main advantage of trading using opposite Amcap Fund and Multisector Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, Multisector Bond 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 Multisector Bond will offset losses from the drop in Multisector Bond's long position.

The idea behind Amcap Fund Class and Multisector Bond Sma 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.