Correlation Between American Balanced and American Beacon
Can any of the company-specific risk be diversified away by investing in both American Balanced and American Beacon 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 American Beacon 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 American Beacon Balanced, you can compare the effects of market volatilities on American Balanced and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and American Beacon.
Diversification Opportunities for American Balanced and American Beacon
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and American Beacon Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Balanced 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Balanced has no effect on the direction of American Balanced i.e., American Balanced and American Beacon go up and down completely randomly.
Pair Corralation between American Balanced and American Beacon
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.06 times more return on investment than American Beacon. However, American Balanced is 1.06 times more volatile than American Beacon Balanced. It trades about 0.14 of its potential returns per unit of risk. American Beacon Balanced is currently generating about 0.14 per unit of risk. If you would invest 3,057 in American Balanced Fund on September 4, 2024 and sell it today you would earn a total of 604.00 from holding American Balanced Fund or generate 19.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
American Balanced Fund vs. American Beacon Balanced
Performance |
| Timeline |
| American Balanced |
| American Beacon Balanced |
American Balanced and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and American Beacon
The main advantage of trading using opposite American Balanced and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| American Balanced vs. Calamos Global Equity | American Balanced vs. Sarofim Equity | American Balanced vs. Nationwide Global Equity | American Balanced vs. Ab Select Equity |
| American Beacon vs. American Beacon International | American Beacon vs. American Beacon Large | American Beacon vs. American Beacon Small | American Beacon vs. Dreyfus Opportunistic Midcap |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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