Correlation Between Multisector Bond and American Balanced
Can any of the company-specific risk be diversified away by investing in both Multisector Bond 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 Multisector Bond and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multisector Bond Sma and American Balanced Fund, you can compare the effects of market volatilities on Multisector Bond 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 Multisector Bond with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multisector Bond and American Balanced.
Diversification Opportunities for Multisector Bond and American Balanced
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Multisector and American is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Multisector Bond 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 Multisector Bond Sma 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 Multisector Bond i.e., Multisector Bond and American Balanced go up and down completely randomly.
Pair Corralation between Multisector Bond and American Balanced
Assuming the 90 days horizon Multisector Bond is expected to generate 1.45 times less return on investment than American Balanced. But when comparing it to its historical volatility, Multisector Bond Sma is 1.36 times less risky than American Balanced. It trades about 0.14 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,009 in American Balanced Fund on September 15, 2024 and sell it today you would earn a total of 675.00 from holding American Balanced Fund or generate 22.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multisector Bond Sma vs. American Balanced Fund
Performance |
| Timeline |
| Multisector Bond Sma |
| American Balanced |
Multisector Bond and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multisector Bond and American Balanced
The main advantage of trading using opposite Multisector Bond and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multisector Bond 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.| Multisector Bond vs. Jhancock Disciplined Value | Multisector Bond vs. Guidemark Large Cap | Multisector Bond vs. Qs Large Cap | Multisector Bond vs. Washington Mutual Investors |
| American Balanced vs. John Hancock Financial | American Balanced vs. Davis Financial Fund | American Balanced vs. Prudential Jennison Financial | American Balanced vs. Vanguard Financials Index |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |