Correlation Between American Balanced and MTI Investment
Can any of the company-specific risk be diversified away by investing in both American Balanced and MTI Investment 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 MTI Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and MTI Investment SE, you can compare the effects of market volatilities on American Balanced and MTI Investment 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 MTI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and MTI Investment.
Diversification Opportunities for American Balanced and MTI Investment
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and MTI is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and MTI Investment SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI Investment SE 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 MTI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI Investment SE has no effect on the direction of American Balanced i.e., American Balanced and MTI Investment go up and down completely randomly.
Pair Corralation between American Balanced and MTI Investment
Assuming the 90 days horizon American Balanced is expected to generate 0.27 times more return on investment than MTI Investment. However, American Balanced is 3.68 times less risky than MTI Investment. It trades about 0.2 of its potential returns per unit of risk. MTI Investment SE is currently generating about -0.64 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 | Weak |
| Accuracy | 78.95% |
| Values | Daily Returns |
American Balanced vs. MTI Investment SE
Performance |
| Timeline |
| American Balanced |
| MTI Investment SE |
American Balanced and MTI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and MTI Investment
The main advantage of trading using opposite American Balanced and MTI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, MTI Investment 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 MTI Investment will offset losses from the drop in MTI Investment'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 |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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