Correlation Between American Balanced and IBEX 35
Can any of the company-specific risk be diversified away by investing in both American Balanced and IBEX 35 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 IBEX 35 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and IBEX 35 Index, you can compare the effects of market volatilities on American Balanced and IBEX 35 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 IBEX 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and IBEX 35.
Diversification Opportunities for American Balanced and IBEX 35
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and IBEX is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and IBEX 35 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBEX 35 Index 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 IBEX 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX 35 Index has no effect on the direction of American Balanced i.e., American Balanced and IBEX 35 go up and down completely randomly.
Pair Corralation between American Balanced and IBEX 35
Assuming the 90 days horizon American Balanced is expected to generate 1.93 times less return on investment than IBEX 35. But when comparing it to its historical volatility, American Balanced is 1.16 times less risky than IBEX 35. It trades about 0.22 of its potential returns per unit of risk. IBEX 35 Index is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,167,690 in IBEX 35 Index on November 3, 2024 and sell it today you would earn a total of 69,200 from holding IBEX 35 Index or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
American Balanced vs. IBEX 35 Index
Performance |
| Timeline |
American Balanced and IBEX 35 Volatility Contrast
Predicted Return Density |
| Returns |
American Balanced
Pair trading matchups for American Balanced
IBEX 35 Index
Pair trading matchups for IBEX 35
Pair Trading with American Balanced and IBEX 35
The main advantage of trading using opposite American Balanced and IBEX 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, IBEX 35 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 IBEX 35 will offset losses from the drop in IBEX 35'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 |
| IBEX 35 vs. Melia Hotels | IBEX 35 vs. Ebro Foods | IBEX 35 vs. Borges Agricultural Industrial | IBEX 35 vs. Vytrus Biotech SA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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