Correlation Between American Balanced and Vident Core
Can any of the company-specific risk be diversified away by investing in both American Balanced and Vident Core 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 Vident Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Vident Core Equity, you can compare the effects of market volatilities on American Balanced and Vident Core 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 Vident Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Vident Core.
Diversification Opportunities for American Balanced and Vident Core
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Vident is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Vident Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Equity 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 Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Equity has no effect on the direction of American Balanced i.e., American Balanced and Vident Core go up and down completely randomly.
Pair Corralation between American Balanced and Vident Core
Assuming the 90 days horizon American Balanced is expected to generate 1.76 times less return on investment than Vident Core. But when comparing it to its historical volatility, American Balanced is 1.37 times less risky than Vident Core. It trades about 0.21 of its potential returns per unit of risk. Vident Core Equity is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 5,864 in Vident Core Equity on November 3, 2024 and sell it today you would earn a total of 284.00 from holding Vident Core Equity or generate 4.84% 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. Vident Core Equity
Performance |
| Timeline |
| American Balanced |
| Vident Core Equity |
American Balanced and Vident Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Vident Core
The main advantage of trading using opposite American Balanced and Vident Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Vident Core 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 Vident Core will offset losses from the drop in Vident Core'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 |
| Vident Core vs. Vident International Equity | Vident Core vs. Vident Core Bond | Vident Core vs. VictoryShares 500 Enhanced | Vident Core vs. First Trust Eurozone |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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