Correlation Between American Funds and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both American Funds and Balanced 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 Funds and Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds American and Balanced Fund Institutional, you can compare the effects of market volatilities on American Funds and Balanced 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 Funds with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Balanced Fund.
Diversification Opportunities for American Funds and Balanced Fund
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Balanced is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Balanced Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Instit and American Funds 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 Funds American are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Instit has no effect on the direction of American Funds i.e., American Funds and Balanced Fund go up and down completely randomly.
Pair Corralation between American Funds and Balanced Fund
Assuming the 90 days horizon American Funds American is expected to generate 0.94 times more return on investment than Balanced Fund. However, American Funds American is 1.06 times less risky than Balanced Fund. It trades about 0.17 of its potential returns per unit of risk. Balanced Fund Institutional is currently generating about 0.12 per unit of risk. If you would invest 2,917 in American Funds American on September 1, 2024 and sell it today you would earn a total of 761.00 from holding American Funds American or generate 26.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Funds American vs. Balanced Fund Institutional
Performance |
| Timeline |
| American Funds American |
| Balanced Fund Instit |
American Funds and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Balanced Fund
The main advantage of trading using opposite American Funds and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Balanced 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.| American Funds vs. Calamos Dynamic Convertible | American Funds vs. Federated Ultrashort Bond | American Funds vs. Maryland Tax Free Bond | American Funds vs. Ambrus Core Bond |
| Balanced Fund vs. Tributary Smallmid Cap | Balanced Fund vs. Tributary Smallmid Cap | Balanced Fund vs. Balanced Fund Institutional | Balanced Fund vs. Income Fund Institutional |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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