Correlation Between American Balanced and Timothy Plan
Can any of the company-specific risk be diversified away by investing in both American Balanced and Timothy Plan 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 Timothy Plan 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 Timothy Plan Defensive, you can compare the effects of market volatilities on American Balanced and Timothy Plan 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 Timothy Plan. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Timothy Plan.
Diversification Opportunities for American Balanced and Timothy Plan
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Timothy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Timothy Plan Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Defensive 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 Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan Defensive has no effect on the direction of American Balanced i.e., American Balanced and Timothy Plan go up and down completely randomly.
Pair Corralation between American Balanced and Timothy Plan
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.16 times more return on investment than Timothy Plan. However, American Balanced is 1.16 times more volatile than Timothy Plan Defensive. It trades about 0.08 of its potential returns per unit of risk. Timothy Plan Defensive is currently generating about 0.05 per unit of risk. If you would invest 2,860 in American Balanced Fund on November 2, 2024 and sell it today you would earn a total of 656.00 from holding American Balanced Fund or generate 22.94% 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. Timothy Plan Defensive
Performance |
| Timeline |
| American Balanced |
| Timothy Plan Defensive |
American Balanced and Timothy Plan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Timothy Plan
The main advantage of trading using opposite American Balanced and Timothy Plan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Timothy Plan 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 Timothy Plan will offset losses from the drop in Timothy Plan's long position.| American Balanced vs. L Abbett Growth | American Balanced vs. T Rowe Price | American Balanced vs. Tax Managed Large Cap | American Balanced vs. Tfa Alphagen Growth |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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