Correlation Between Mid Cap and American Balanced
Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value Profund and American Balanced Fund, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and American Balanced.
Diversification Opportunities for Mid Cap and American Balanced
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and American is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Mid Cap 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 Mid Cap Value Profund 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 Mid Cap i.e., Mid Cap and American Balanced go up and down completely randomly.
Pair Corralation between Mid Cap and American Balanced
Assuming the 90 days horizon Mid Cap is expected to generate 1.21 times less return on investment than American Balanced. In addition to that, Mid Cap is 2.02 times more volatile than American Balanced Fund. It trades about 0.03 of its total potential returns per unit of risk. American Balanced Fund is currently generating about 0.06 per unit of volatility. If you would invest 3,636 in American Balanced Fund on September 13, 2024 and sell it today you would earn a total of 17.00 from holding American Balanced Fund or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value Profund vs. American Balanced Fund
Performance |
| Timeline |
| Mid Cap Value |
| American Balanced |
Mid Cap and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and American Balanced
The main advantage of trading using opposite Mid Cap and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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.| Mid Cap vs. Blackrock Health Sciences | Mid Cap vs. Baron Health Care | Mid Cap vs. The Gabelli Healthcare | Mid Cap vs. Live Oak Health |
| American Balanced vs. Franklin High Yield | American Balanced vs. Morningstar Defensive Bond | American Balanced vs. Pace High Yield | American Balanced vs. Ambrus Core Bond |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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