Correlation Between American Funds and Toews Unconstrained

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

By analyzing existing cross correlation between American Funds Tax Exempt and Toews Unconstrained Income, you can compare the effects of market volatilities on American Funds and Toews Unconstrained 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 Toews Unconstrained. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Toews Unconstrained.

Diversification Opportunities for American Funds and Toews Unconstrained

0.69

Correlation Coefficient

American Funds  Toews Unconstrained

Poor diversification

The 3 months correlation between American and Toews is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Tax Exempt and Toews Unconstrained Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toews Unconstrained 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 Tax Exempt are associated (or correlated) with Toews Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toews Unconstrained has no effect on the direction of American Funds i.e., American Funds and Toews Unconstrained go up and down completely randomly.

Pair Corralation between American Funds and Toews Unconstrained

Assuming the 90 days horizon American Funds is expected to generate 1.18 times less return on investment than Toews Unconstrained. But when comparing it to its historical volatility, American Funds Tax Exempt is 2.33 times less risky than Toews Unconstrained. It trades about 0.36 of its potential returns per unit of risk. Toews Unconstrained Income is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  909.00  in Toews Unconstrained Income on May 6, 2025 and sell it today you would earn a total of  18.00  from holding Toews Unconstrained Income or generate 1.98% return on investment over 90 days.

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

American Funds Tax Exempt  vs.  Toews Unconstrained Income

American Funds Tax

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Tax Exempt are ranked lower than 28 (%) 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.

Toews Unconstrained

Risk-Adjusted Performance

Good

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

Pair Trading with American Funds and Toews Unconstrained

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

The idea behind American Funds Tax Exempt and Toews Unconstrained 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.