Correlation Between American Balanced and Scharf Fund
Can any of the company-specific risk be diversified away by investing in both American Balanced and Scharf Fund 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 Scharf Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and Scharf Fund Retail, you can compare the effects of market volatilities on American Balanced and Scharf Fund 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 Scharf Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Scharf Fund.
Diversification Opportunities for American Balanced and Scharf Fund
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Scharf is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Scharf Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scharf Fund Retail 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 Fund are associated (or correlated) with Scharf Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scharf Fund Retail has no effect on the direction of American Balanced i.e., American Balanced and Scharf Fund go up and down completely randomly.
Pair Corralation between American Balanced and Scharf Fund
Assuming the 90 days horizon American Balanced is expected to generate 2.16 times less return on investment than Scharf Fund. But when comparing it to its historical volatility, American Balanced Fund is 1.34 times less risky than Scharf Fund. It trades about 0.28 of its potential returns per unit of risk. Scharf Fund Retail is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 5,428 in Scharf Fund Retail on September 1, 2024 and sell it today you would earn a total of 329.00 from holding Scharf Fund Retail or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Balanced Fund vs. Scharf Fund Retail
Performance |
| Timeline |
| American Balanced |
| Scharf Fund Retail |
American Balanced and Scharf Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Scharf Fund
The main advantage of trading using opposite American Balanced and Scharf Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Scharf Fund 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 Scharf Fund will offset losses from the drop in Scharf Fund's long position.| American Balanced vs. Scharf Fund Retail | American Balanced vs. Small Cap Equity | American Balanced vs. Calamos Global Equity | American Balanced vs. Rbc Global Equity |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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