Correlation Between American Funds and Cohen Steers

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

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

Diversification Opportunities for American Funds and Cohen Steers

0.89

Correlation Coefficient

American Funds  Cohen Steers

Very poor diversification

The 3 months correlation between American and Cohen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Balanced and Cohen Steers Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Steers Closed and American Funds 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 American Funds Balanced are associated (or correlated) with Cohen Steers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Steers Closed has no effect on the direction of American Funds i.e., American Funds and Cohen Steers go up and down completely randomly.

Pair Corralation between American Funds and Cohen Steers

Assuming the 90 days horizon American Funds is expected to generate 1.38 times less return on investment than Cohen Steers. But when comparing it to its historical volatility, American Funds Balanced is 1.15 times less risky than Cohen Steers. It trades about 0.28 of its potential returns per unit of risk. Cohen Steers Closed is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,258  in Cohen Steers Closed on July 4, 2024 and sell it today you would earn a total of  48.00  from holding Cohen Steers Closed or generate 3.82% return on investment over 90 days.

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

American Funds Balanced  vs.  Cohen Steers Closed

American Funds Balanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Balanced are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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.

Cohen Steers Closed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Steers Closed are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly inconsistent basic indicators, Cohen Steers may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with American Funds and Cohen Steers

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

The idea behind American Funds Balanced and Cohen Steers Closed 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.