Correlation Between American Balanced and Northland Power
Can any of the company-specific risk be diversified away by investing in both American Balanced and Northland Power 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 Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Northland Power, you can compare the effects of market volatilities on American Balanced and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Northland Power.
Diversification Opportunities for American Balanced and Northland Power
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Northland is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of American Balanced i.e., American Balanced and Northland Power go up and down completely randomly.
Pair Corralation between American Balanced and Northland Power
Assuming the 90 days horizon American Balanced is expected to generate 0.31 times more return on investment than Northland Power. However, American Balanced is 3.23 times less risky than Northland Power. It trades about 0.22 of its potential returns per unit of risk. Northland Power is currently generating about -0.14 per unit of risk. If you would invest 3,439 in American Balanced on November 3, 2024 and sell it today you would earn a total of 94.00 from holding American Balanced or generate 2.73% 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. Northland Power
Performance |
| Timeline |
| American Balanced |
| Northland Power |
American Balanced and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Northland Power
The main advantage of trading using opposite American Balanced and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power'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 |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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