Correlation Between American Balanced and Amana Participation
Can any of the company-specific risk be diversified away by investing in both American Balanced and Amana Participation 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 Amana Participation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Amana Participation Fund, you can compare the effects of market volatilities on American Balanced and Amana Participation 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 Amana Participation. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Amana Participation.
Diversification Opportunities for American Balanced and Amana Participation
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Amana is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Amana Participation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Participation 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 Amana Participation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Participation has no effect on the direction of American Balanced i.e., American Balanced and Amana Participation go up and down completely randomly.
Pair Corralation between American Balanced and Amana Participation
Assuming the 90 days horizon American Balanced is expected to generate 6.41 times more return on investment than Amana Participation. However, American Balanced is 6.41 times more volatile than Amana Participation Fund. It trades about 0.2 of its potential returns per unit of risk. Amana Participation Fund is currently generating about 0.06 per unit of risk. If you would invest 3,457 in American Balanced on October 23, 2024 and sell it today you would earn a total of 77.00 from holding American Balanced or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Balanced vs. Amana Participation Fund
Performance |
| Timeline |
| American Balanced |
| Amana Participation |
American Balanced and Amana Participation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Amana Participation
The main advantage of trading using opposite American Balanced and Amana Participation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Amana Participation 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 Amana Participation will offset losses from the drop in Amana Participation's 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 |
| Amana Participation vs. Amana Developing World | Amana Participation vs. Amana Growth Fund | Amana Participation vs. Amana Developing World | Amana Participation vs. Amana Income Fund |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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