Correlation Between American Balanced and Eic Value
Can any of the company-specific risk be diversified away by investing in both American Balanced and Eic Value 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 Eic Value 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 Eic Value Fund, you can compare the effects of market volatilities on American Balanced and Eic Value 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 Eic Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Eic Value.
Diversification Opportunities for American Balanced and Eic Value
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Eic is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Eic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eic Value 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 Eic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eic Value Fund has no effect on the direction of American Balanced i.e., American Balanced and Eic Value go up and down completely randomly.
Pair Corralation between American Balanced and Eic Value
Assuming the 90 days horizon American Balanced is expected to generate 1.58 times less return on investment than Eic Value. But when comparing it to its historical volatility, American Balanced Fund is 1.26 times less risky than Eic Value. It trades about 0.28 of its potential returns per unit of risk. Eic Value Fund is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,775 in Eic Value Fund on September 2, 2024 and sell it today you would earn a total of 80.00 from holding Eic Value Fund or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Eic Value Fund
Performance |
| Timeline |
| American Balanced |
| Eic Value Fund |
American Balanced and Eic Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Eic Value
The main advantage of trading using opposite American Balanced and Eic Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Eic Value 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 Eic Value will offset losses from the drop in Eic Value's long position.| American Balanced vs. 1919 Financial Services | American Balanced vs. Blackrock Financial Institutions | American Balanced vs. Davis Financial Fund | American Balanced vs. Vanguard Financials Index |
| Eic Value vs. Eic Value Fund | Eic Value vs. Fidelity Advisor Diversified | Eic Value vs. Columbia Dividend Income | Eic Value vs. American Balanced Fund |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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