Correlation Between American Balanced and Sparta Capital
Can any of the company-specific risk be diversified away by investing in both American Balanced and Sparta Capital 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 Sparta Capital 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 Sparta Capital, you can compare the effects of market volatilities on American Balanced and Sparta Capital 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 Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Sparta Capital.
Diversification Opportunities for American Balanced and Sparta Capital
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Sparta is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of American Balanced i.e., American Balanced and Sparta Capital go up and down completely randomly.
Pair Corralation between American Balanced and Sparta Capital
Assuming the 90 days horizon American Balanced Fund is expected to generate 0.07 times more return on investment than Sparta Capital. However, American Balanced Fund is 15.01 times less risky than Sparta Capital. It trades about 0.11 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.0 per unit of risk. If you would invest 2,638 in American Balanced Fund on November 27, 2024 and sell it today you would earn a total of 880.00 from holding American Balanced Fund or generate 33.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Sparta Capital
Performance |
| Timeline |
| American Balanced |
| Sparta Capital |
American Balanced and Sparta Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Sparta Capital
The main advantage of trading using opposite American Balanced and Sparta Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Sparta Capital 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 Sparta Capital will offset losses from the drop in Sparta Capital'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 |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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