Correlation Between American Balanced and Bond Fund
Can any of the company-specific risk be diversified away by investing in both American Balanced and Bond Fund 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 American Balanced and Bond Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and Bond Fund Of, you can compare the effects of market volatilities on American Balanced and Bond Fund 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 American Balanced with a short position of Bond Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Bond Fund.
Diversification Opportunities for American Balanced and Bond Fund
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Bond is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Bond Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Fund and American Balanced 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 American Balanced Fund are associated (or correlated) with Bond Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Fund has no effect on the direction of American Balanced i.e., American Balanced and Bond Fund go up and down completely randomly.
Pair Corralation between American Balanced and Bond Fund
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.44 times more return on investment than Bond Fund. However, American Balanced is 1.44 times more volatile than Bond Fund Of. It trades about 0.27 of its potential returns per unit of risk. Bond Fund Of is currently generating about 0.15 per unit of risk. If you would invest 3,560 in American Balanced Fund on September 2, 2024 and sell it today you would earn a total of 100.00 from holding American Balanced Fund or generate 2.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Bond Fund Of
Performance |
| Timeline |
| American Balanced |
| Bond Fund |
American Balanced and Bond Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Bond Fund
The main advantage of trading using opposite American Balanced and Bond Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Bond Fund 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 Bond Fund will offset losses from the drop in Bond Fund's long position.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
| Bond Fund vs. Ab Bond Inflation | Bond Fund vs. Aqr Managed Futures | Bond Fund vs. Ab Bond Inflation | Bond Fund vs. Ab Bond Inflation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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