Correlation Between American Balanced and IShares Regional
Can any of the company-specific risk be diversified away by investing in both American Balanced and IShares Regional 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 IShares Regional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and iShares Regional Banks, you can compare the effects of market volatilities on American Balanced and IShares Regional 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 IShares Regional. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and IShares Regional.
Diversification Opportunities for American Balanced and IShares Regional
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and IShares is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and iShares Regional Banks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Regional Banks 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 IShares Regional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Regional Banks has no effect on the direction of American Balanced i.e., American Balanced and IShares Regional go up and down completely randomly.
Pair Corralation between American Balanced and IShares Regional
Assuming the 90 days horizon American Balanced is expected to generate 2.57 times less return on investment than IShares Regional. But when comparing it to its historical volatility, American Balanced is 2.4 times less risky than IShares Regional. It trades about 0.21 of its potential returns per unit of risk. iShares Regional Banks is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,045 in iShares Regional Banks on October 24, 2024 and sell it today you would earn a total of 289.00 from holding iShares Regional Banks or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced vs. iShares Regional Banks
Performance |
| Timeline |
| American Balanced |
| iShares Regional Banks |
American Balanced and IShares Regional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and IShares Regional
The main advantage of trading using opposite American Balanced and IShares Regional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, IShares Regional 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 IShares Regional will offset losses from the drop in IShares Regional'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 |
| IShares Regional vs. iShares Broker Dealers Securities | IShares Regional vs. iShares Insurance ETF | IShares Regional vs. iShares Financial Services | IShares Regional vs. iShares Financials ETF |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |