Correlation Between American Balanced and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both American Balanced and Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy Fund, you can compare the effects of market volatilities on American Balanced and Balanced Strategy 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 Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Balanced Strategy.
Diversification Opportunities for American Balanced and Balanced Strategy
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Balanced is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of American Balanced i.e., American Balanced and Balanced Strategy go up and down completely randomly.
Pair Corralation between American Balanced and Balanced Strategy
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.1 times more return on investment than Balanced Strategy. However, American Balanced is 1.1 times more volatile than Balanced Strategy Fund. It trades about 0.12 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.12 per unit of risk. If you would invest 3,620 in American Balanced Fund on August 28, 2024 and sell it today you would earn a total of 52.00 from holding American Balanced Fund or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Balanced Strategy Fund
Performance |
| Timeline |
| American Balanced |
| Balanced Strategy |
American Balanced and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Balanced Strategy
The main advantage of trading using opposite American Balanced and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Balanced Strategy 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 Balanced Strategy will offset losses from the drop in Balanced Strategy'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 |
| Balanced Strategy vs. Columbia Real Estate | Balanced Strategy vs. Dunham Real Estate | Balanced Strategy vs. Prudential Real Estate | Balanced Strategy vs. T Rowe Price |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |