Correlation Between American Balanced and Euro Tech
Can any of the company-specific risk be diversified away by investing in both American Balanced and Euro Tech 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 Euro Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Euro Tech Holdings, you can compare the effects of market volatilities on American Balanced and Euro Tech 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 Euro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Euro Tech.
Diversification Opportunities for American Balanced and Euro Tech
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Euro is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Euro Tech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euro Tech Holdings 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 Euro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euro Tech Holdings has no effect on the direction of American Balanced i.e., American Balanced and Euro Tech go up and down completely randomly.
Pair Corralation between American Balanced and Euro Tech
Assuming the 90 days horizon American Balanced is expected to generate 0.23 times more return on investment than Euro Tech. However, American Balanced is 4.27 times less risky than Euro Tech. It trades about 0.2 of its potential returns per unit of risk. Euro Tech Holdings is currently generating about -0.19 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced vs. Euro Tech Holdings
Performance |
| Timeline |
| American Balanced |
| Euro Tech Holdings |
American Balanced and Euro Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Euro Tech
The main advantage of trading using opposite American Balanced and Euro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Euro Tech 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 Euro Tech will offset losses from the drop in Euro Tech'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 |
| Euro Tech vs. LiqTech International | Euro Tech vs. TOMI Environmental Solutions | Euro Tech vs. ClearSign Combustion | Euro Tech vs. Vow ASA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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