Correlation Between American Balanced and Transamerica Intermediate
Can any of the company-specific risk be diversified away by investing in both American Balanced and Transamerica Intermediate 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 Transamerica Intermediate 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 Transamerica Intermediate Muni, you can compare the effects of market volatilities on American Balanced and Transamerica Intermediate 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 Transamerica Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Transamerica Intermediate.
Diversification Opportunities for American Balanced and Transamerica Intermediate
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Transamerica is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Transamerica Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Intermediate 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 Transamerica Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Intermediate has no effect on the direction of American Balanced i.e., American Balanced and Transamerica Intermediate go up and down completely randomly.
Pair Corralation between American Balanced and Transamerica Intermediate
Assuming the 90 days horizon American Balanced Fund is expected to generate 2.47 times more return on investment than Transamerica Intermediate. However, American Balanced is 2.47 times more volatile than Transamerica Intermediate Muni. It trades about 0.12 of its potential returns per unit of risk. Transamerica Intermediate Muni is currently generating about 0.07 per unit of risk. If you would invest 3,429 in American Balanced Fund on October 23, 2024 and sell it today you would earn a total of 42.00 from holding American Balanced Fund or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
American Balanced Fund vs. Transamerica Intermediate Muni
Performance |
| Timeline |
| American Balanced |
| Transamerica Intermediate |
American Balanced and Transamerica Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Transamerica Intermediate
The main advantage of trading using opposite American Balanced and Transamerica Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Transamerica Intermediate 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 Transamerica Intermediate will offset losses from the drop in Transamerica Intermediate's long position.| American Balanced vs. Invesco Global Health | American Balanced vs. Deutsche Health And | American Balanced vs. Tekla Healthcare Investors | American Balanced vs. Blackrock Health Sciences |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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