Correlation Between American Balanced and Income Fund
Can any of the company-specific risk be diversified away by investing in both American Balanced and Income Fund 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 Income Fund 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 Income Fund Of, you can compare the effects of market volatilities on American Balanced and Income Fund 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Income Fund.
Diversification Opportunities for American Balanced and Income Fund
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Income is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Income Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund has no effect on the direction of American Balanced i.e., American Balanced and Income Fund go up and down completely randomly.
Pair Corralation between American Balanced and Income Fund
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.21 times more return on investment than Income Fund. However, American Balanced is 1.21 times more volatile than Income Fund Of. It trades about 0.07 of its potential returns per unit of risk. Income Fund Of is currently generating about 0.06 per unit of risk. If you would invest 3,614 in American Balanced Fund on August 27, 2024 and sell it today you would earn a total of 28.00 from holding American Balanced Fund or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Income Fund Of
Performance |
| Timeline |
| American Balanced |
| Income Fund |
American Balanced and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Income Fund
The main advantage of trading using opposite American Balanced and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Income Fund 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 Income Fund will offset losses from the drop in Income Fund'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 |
| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced Fund | Income Fund vs. Growth Fund Of |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |