Correlation Between American Balanced and Green Century
Can any of the company-specific risk be diversified away by investing in both American Balanced and Green Century 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 Green Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Green Century Balanced, you can compare the effects of market volatilities on American Balanced and Green Century 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 Green Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Green Century.
Diversification Opportunities for American Balanced and Green Century
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Green is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Green Century Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Century Balanced 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 Green Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Century Balanced has no effect on the direction of American Balanced i.e., American Balanced and Green Century go up and down completely randomly.
Pair Corralation between American Balanced and Green Century
Assuming the 90 days horizon American Balanced is expected to generate 1.06 times more return on investment than Green Century. However, American Balanced is 1.06 times more volatile than Green Century Balanced. It trades about 0.12 of its potential returns per unit of risk. Green Century Balanced is currently generating about 0.1 per unit of risk. If you would invest 3,287 in American Balanced on September 1, 2024 and sell it today you would earn a total of 407.00 from holding American Balanced or generate 12.38% 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. Green Century Balanced
Performance |
| Timeline |
| American Balanced |
| Green Century Balanced |
American Balanced and Green Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Green Century
The main advantage of trading using opposite American Balanced and Green Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Green Century 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 Green Century will offset losses from the drop in Green Century'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 |
| Green Century vs. Us Strategic Equity | Green Century vs. Multimedia Portfolio Multimedia | Green Century vs. Jpmorgan Equity Income | Green Century vs. Ms Global Fixed |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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