Correlation Between American Funds and Sentinel Balanced
Can any of the company-specific risk be diversified away by investing in both American Funds and Sentinel 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 American Funds and Sentinel Balanced 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 Sentinel Balanced Fund, you can compare the effects of market volatilities on American Funds and Sentinel 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 American Funds with a short position of Sentinel Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Sentinel Balanced.
Diversification Opportunities for American Funds and Sentinel Balanced
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Sentinel is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Sentinel Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Balanced 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 Sentinel Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Balanced has no effect on the direction of American Funds i.e., American Funds and Sentinel Balanced go up and down completely randomly.
Pair Corralation between American Funds and Sentinel Balanced
Assuming the 90 days horizon American Funds is expected to generate 1.77 times less return on investment than Sentinel Balanced. But when comparing it to its historical volatility, American Funds American is 1.0 times less risky than Sentinel Balanced. It trades about 0.08 of its potential returns per unit of risk. Sentinel Balanced Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,811 in Sentinel Balanced Fund on August 27, 2024 and sell it today you would earn a total of 42.00 from holding Sentinel Balanced Fund or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds American vs. Sentinel Balanced Fund
Performance |
| Timeline |
| American Funds American |
| Sentinel Balanced |
American Funds and Sentinel Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Sentinel Balanced
The main advantage of trading using opposite American Funds and Sentinel Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Sentinel 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 Sentinel Balanced will offset losses from the drop in Sentinel Balanced'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 |
| Sentinel Balanced vs. Sentinel Mon Stock | Sentinel Balanced vs. Sentinel International Equity | Sentinel Balanced vs. Sentinel Small Pany |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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