Correlation Between Mfs Prudent and American Balanced
Can any of the company-specific risk be diversified away by investing in both Mfs Prudent and American 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 Mfs Prudent and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs Prudent Investor and American Balanced Fund, you can compare the effects of market volatilities on Mfs Prudent and American 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 Mfs Prudent with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Prudent and American Balanced.
Diversification Opportunities for Mfs Prudent and American Balanced
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mfs and American is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Prudent Investor and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Mfs Prudent 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 Mfs Prudent Investor are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Mfs Prudent i.e., Mfs Prudent and American Balanced go up and down completely randomly.
Pair Corralation between Mfs Prudent and American Balanced
Assuming the 90 days horizon Mfs Prudent is expected to generate 2.05 times less return on investment than American Balanced. But when comparing it to its historical volatility, Mfs Prudent Investor is 1.25 times less risky than American Balanced. It trades about 0.07 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,914 in American Balanced Fund on August 31, 2024 and sell it today you would earn a total of 755.00 from holding American Balanced Fund or generate 25.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs Prudent Investor vs. American Balanced Fund
Performance |
| Timeline |
| Mfs Prudent Investor |
| American Balanced |
Mfs Prudent and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs Prudent and American Balanced
The main advantage of trading using opposite Mfs Prudent and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs Prudent position performs unexpectedly, American 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 American Balanced will offset losses from the drop in American Balanced's long position.| Mfs Prudent vs. American Funds American | Mfs Prudent vs. American Funds American | Mfs Prudent vs. American Balanced | Mfs Prudent vs. American Balanced Fund |
| American Balanced vs. American Funds 2015 | American Balanced vs. American Mutual Fund | American Balanced vs. American Funds Income | American Balanced vs. American Funds Preservation |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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