Correlation Between American Balanced and American Assets
Can any of the company-specific risk be diversified away by investing in both American Balanced and American Assets 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 Balanced and American Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and American Assets Trust, you can compare the effects of market volatilities on American Balanced and American Assets 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 Balanced with a short position of American Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and American Assets.
Diversification Opportunities for American Balanced and American Assets
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and American Assets Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Assets Trust and American Balanced 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 Balanced are associated (or correlated) with American Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Assets Trust has no effect on the direction of American Balanced i.e., American Balanced and American Assets go up and down completely randomly.
Pair Corralation between American Balanced and American Assets
Assuming the 90 days horizon American Balanced is expected to generate 2.16 times less return on investment than American Assets. But when comparing it to its historical volatility, American Balanced is 2.48 times less risky than American Assets. It trades about 0.06 of its potential returns per unit of risk. American Assets Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,117 in American Assets Trust on November 3, 2024 and sell it today you would earn a total of 315.00 from holding American Assets Trust or generate 14.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced vs. American Assets Trust
Performance |
| Timeline |
| American Balanced |
| American Assets Trust |
American Balanced and American Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and American Assets
The main advantage of trading using opposite American Balanced and American Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, American Assets 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 Assets will offset losses from the drop in American Assets' long position.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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