Correlation Between American Balanced and Capital World
Can any of the company-specific risk be diversified away by investing in both American Balanced and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on American Balanced and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Capital World.
Diversification Opportunities for American Balanced and Capital World
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AMERICAN and Capital is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of American Balanced i.e., American Balanced and Capital World go up and down completely randomly.
Pair Corralation between American Balanced and Capital World
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.31 times more return on investment than Capital World. However, American Balanced is 1.31 times more volatile than Capital World Bond. It trades about 0.12 of its potential returns per unit of risk. Capital World Bond is currently generating about -0.11 per unit of risk. If you would invest 3,594 in American Balanced Fund on August 28, 2024 and sell it today you would earn a total of 49.00 from holding American Balanced Fund or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Balanced Fund vs. Capital World Bond
Performance |
| Timeline |
| American Balanced |
| Capital World Bond |
American Balanced and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Capital World
The main advantage of trading using opposite American Balanced and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| American Balanced vs. Jhancock Real Estate | American Balanced vs. Deutsche Real Estate | American Balanced vs. Amg Managers Centersquare | American Balanced vs. Dunham Real Estate |
| Capital World vs. Huber Capital Diversified | Capital World vs. Prudential Core Conservative | Capital World vs. Western Asset Diversified | Capital World vs. Adams Diversified Equity |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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