Correlation Between Growth Fund and American Balanced
Can any of the company-specific risk be diversified away by investing in both Growth Fund 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 Growth Fund and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and American Balanced Fund, you can compare the effects of market volatilities on Growth Fund 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 Growth Fund with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and American Balanced.
Diversification Opportunities for Growth Fund and American Balanced
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and American is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Growth 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 Growth Fund Of 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 Growth Fund i.e., Growth Fund and American Balanced go up and down completely randomly.
Pair Corralation between Growth Fund and American Balanced
Assuming the 90 days horizon Growth Fund Of is expected to generate 1.91 times more return on investment than American Balanced. However, Growth Fund is 1.91 times more volatile than American Balanced Fund. It trades about 0.11 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.11 per unit of risk. If you would invest 4,991 in Growth Fund Of on August 31, 2024 and sell it today you would earn a total of 3,185 from holding Growth Fund Of or generate 63.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Growth Fund Of vs. American Balanced Fund
Performance |
| Timeline |
| Growth Fund |
| American Balanced |
Growth Fund and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and American Balanced
The main advantage of trading using opposite Growth Fund and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund 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.| Growth Fund vs. Europacific Growth Fund | Growth Fund vs. Capital World Growth | Growth Fund vs. American Funds Fundamental | Growth Fund vs. Washington Mutual Investors |
| American Balanced vs. Growth Fund Of | American Balanced vs. New Perspective Fund | American Balanced vs. Smallcap World Fund | American Balanced vs. Capital Income Builder |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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