Correlation Between American Funds and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both American Funds and Balanced Strategy 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 Strategy 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 Strategy Fund, you can compare the effects of market volatilities on American Funds and Balanced Strategy 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 Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Balanced Strategy.
Diversification Opportunities for American Funds and Balanced Strategy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Balanced is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy 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 Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of American Funds i.e., American Funds and Balanced Strategy go up and down completely randomly.
Pair Corralation between American Funds and Balanced Strategy
Assuming the 90 days horizon American Funds is expected to generate 1.38 times less return on investment than Balanced Strategy. In addition to that, American Funds is 1.16 times more volatile than Balanced Strategy Fund. It trades about 0.07 of its total potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.11 per unit of volatility. If you would invest 1,032 in Balanced Strategy Fund on August 28, 2024 and sell it today you would earn a total of 12.00 from holding Balanced Strategy Fund or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds American vs. Balanced Strategy Fund
Performance |
| Timeline |
| American Funds American |
| Balanced Strategy |
American Funds and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Balanced Strategy
The main advantage of trading using opposite American Funds and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Balanced Strategy 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 Strategy will offset losses from the drop in Balanced Strategy's long position.| American Funds vs. Income Fund Of | American Funds vs. Capital Income Builder | American Funds vs. Capital World Growth | American Funds vs. Growth Fund Of |
| Balanced Strategy vs. International Developed Markets | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate | Balanced Strategy vs. Global Real Estate |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |