Correlation Between American Balanced and Nel ASA
Can any of the company-specific risk be diversified away by investing in both American Balanced and Nel ASA 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 Nel ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Nel ASA, you can compare the effects of market volatilities on American Balanced and Nel ASA 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 Nel ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Nel ASA.
Diversification Opportunities for American Balanced and Nel ASA
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Nel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of American Balanced i.e., American Balanced and Nel ASA go up and down completely randomly.
Pair Corralation between American Balanced and Nel ASA
Assuming the 90 days horizon American Balanced is expected to generate 0.09 times more return on investment than Nel ASA. However, American Balanced is 11.33 times less risky than Nel ASA. It trades about 0.17 of its potential returns per unit of risk. Nel ASA is currently generating about -0.08 per unit of risk. If you would invest 3,460 in American Balanced on November 4, 2024 and sell it today you would earn a total of 73.00 from holding American Balanced or generate 2.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
American Balanced vs. Nel ASA
Performance |
| Timeline |
| American Balanced |
| Nel ASA |
American Balanced and Nel ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Nel ASA
The main advantage of trading using opposite American Balanced and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Nel ASA 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 Nel ASA will offset losses from the drop in Nel ASA'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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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