Correlation Between American Balanced and Global X
Can any of the company-specific risk be diversified away by investing in both American Balanced and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Global X Guru, you can compare the effects of market volatilities on American Balanced and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Global X.
Diversification Opportunities for American Balanced and Global X
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Global is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Global X Guru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Guru 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Guru has no effect on the direction of American Balanced i.e., American Balanced and Global X go up and down completely randomly.
Pair Corralation between American Balanced and Global X
Assuming the 90 days horizon American Balanced is expected to generate 2.39 times less return on investment than Global X. But when comparing it to its historical volatility, American Balanced is 1.44 times less risky than Global X. It trades about 0.07 of its potential returns per unit of risk. Global X Guru is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,137 in Global X Guru on November 3, 2024 and sell it today you would earn a total of 1,128 from holding Global X Guru or generate 27.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
American Balanced vs. Global X Guru
Performance |
| Timeline |
| American Balanced |
| Global X Guru |
American Balanced and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Global X
The main advantage of trading using opposite American Balanced and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X'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 |
| Global X vs. Global X Millennials | Global X vs. Global X Social | Global X vs. iShares Core Moderate | Global X vs. SPDR SP Global |
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 Stocks Directory module to find actively traded stocks across global markets.
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