Correlation Between Barings Emerging and American Balanced
Can any of the company-specific risk be diversified away by investing in both Barings Emerging and American Balanced 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 Barings Emerging and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Emerging Markets and American Balanced Fund, you can compare the effects of market volatilities on Barings Emerging and American Balanced 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 Barings Emerging with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Emerging and American Balanced.
Diversification Opportunities for Barings Emerging and American Balanced
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Barings Emerging 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 Barings Emerging Markets are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Barings Emerging i.e., Barings Emerging and American Balanced go up and down completely randomly.
Pair Corralation between Barings Emerging and American Balanced
Assuming the 90 days horizon Barings Emerging is expected to generate 2.17 times less return on investment than American Balanced. But when comparing it to its historical volatility, Barings Emerging Markets is 2.19 times less risky than American Balanced. It trades about 0.27 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,441 in American Balanced Fund on November 8, 2024 and sell it today you would earn a total of 116.00 from holding American Balanced Fund or generate 3.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Barings Emerging Markets vs. American Balanced Fund
Performance |
| Timeline |
| Barings Emerging Markets |
| American Balanced |
Barings Emerging and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Emerging and American Balanced
The main advantage of trading using opposite Barings Emerging and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Emerging position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced's long position.| Barings Emerging vs. Loomis Sayles Inflation | Barings Emerging vs. Guggenheim Managed Futures | Barings Emerging vs. Short Duration Inflation | Barings Emerging vs. Cref Inflation Linked Bond |
| American Balanced vs. Ab Small Cap | American Balanced vs. Small Cap Value | American Balanced vs. Applied Finance Explorer | American Balanced vs. Queens Road 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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