Correlation Between Balanced Fund and Selected American
Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Selected American 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 Balanced Fund and Selected American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Retail and Selected American Shares, you can compare the effects of market volatilities on Balanced Fund and Selected American 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 Balanced Fund with a short position of Selected American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Selected American.
Diversification Opportunities for Balanced Fund and Selected American
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and Selected is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Selected American Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selected American Shares and Balanced Fund 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 Balanced Fund Retail are associated (or correlated) with Selected American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selected American Shares has no effect on the direction of Balanced Fund i.e., Balanced Fund and Selected American go up and down completely randomly.
Pair Corralation between Balanced Fund and Selected American
Assuming the 90 days horizon Balanced Fund is expected to generate 1.02 times less return on investment than Selected American. But when comparing it to its historical volatility, Balanced Fund Retail is 1.72 times less risky than Selected American. It trades about 0.1 of its potential returns per unit of risk. Selected American Shares is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,677 in Selected American Shares on September 12, 2024 and sell it today you would earn a total of 767.00 from holding Selected American Shares or generate 20.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Retail vs. Selected American Shares
Performance |
| Timeline |
| Balanced Fund Retail |
| Selected American Shares |
Balanced Fund and Selected American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Selected American
The main advantage of trading using opposite Balanced Fund and Selected American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Selected American 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 Selected American will offset losses from the drop in Selected American's long position.| Balanced Fund vs. Muirfield Fund Retail | Balanced Fund vs. Dynamic Growth Fund | Balanced Fund vs. Infrastructure Fund Retail | Balanced Fund vs. Quantex Fund Retail |
| Selected American vs. Calamos Global Equity | Selected American vs. Huber Capital Equity | Selected American vs. Artisan Select Equity | Selected American vs. Balanced Fund Retail |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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