Correlation Between American Balanced and Teton Westwood
Can any of the company-specific risk be diversified away by investing in both American Balanced and Teton Westwood 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 Teton Westwood 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 Teton Westwood Balanced, you can compare the effects of market volatilities on American Balanced and Teton Westwood 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 Teton Westwood. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Teton Westwood.
Diversification Opportunities for American Balanced and Teton Westwood
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and TETON is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Teton Westwood Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Westwood 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 Teton Westwood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Westwood Balanced has no effect on the direction of American Balanced i.e., American Balanced and Teton Westwood go up and down completely randomly.
Pair Corralation between American Balanced and Teton Westwood
Assuming the 90 days horizon American Balanced is expected to generate 1.8 times less return on investment than Teton Westwood. But when comparing it to its historical volatility, American Balanced Fund is 1.1 times less risky than Teton Westwood. It trades about 0.13 of its potential returns per unit of risk. Teton Westwood Balanced is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,108 in Teton Westwood Balanced on August 28, 2024 and sell it today you would earn a total of 29.00 from holding Teton Westwood Balanced or generate 2.62% 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. Teton Westwood Balanced
Performance |
| Timeline |
| American Balanced |
| Teton Westwood Balanced |
American Balanced and Teton Westwood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Teton Westwood
The main advantage of trading using opposite American Balanced and Teton Westwood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Teton Westwood 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 Teton Westwood will offset losses from the drop in Teton Westwood'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 |
| Teton Westwood vs. Teton Westwood Equity | Teton Westwood vs. Pax Balanced Fund | Teton Westwood vs. Value Line Income | Teton Westwood vs. Teton Westwood Small |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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