Correlation Between American Balanced and Mfs Prudent
Can any of the company-specific risk be diversified away by investing in both American Balanced and Mfs Prudent 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 Mfs Prudent 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 Mfs Prudent Investor, you can compare the effects of market volatilities on American Balanced and Mfs Prudent 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 Mfs Prudent. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Mfs Prudent.
Diversification Opportunities for American Balanced and Mfs Prudent
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Mfs is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Mfs Prudent Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Prudent Investor 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 Mfs Prudent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Prudent Investor has no effect on the direction of American Balanced i.e., American Balanced and Mfs Prudent go up and down completely randomly.
Pair Corralation between American Balanced and Mfs Prudent
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.37 times more return on investment than Mfs Prudent. However, American Balanced is 1.37 times more volatile than Mfs Prudent Investor. It trades about 0.24 of its potential returns per unit of risk. Mfs Prudent Investor is currently generating about 0.09 per unit of risk. If you would invest 3,596 in American Balanced Fund on September 1, 2024 and sell it today you would earn a total of 87.00 from holding American Balanced Fund or generate 2.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Mfs Prudent Investor
Performance |
| Timeline |
| American Balanced |
| Mfs Prudent Investor |
American Balanced and Mfs Prudent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Mfs Prudent
The main advantage of trading using opposite American Balanced and Mfs Prudent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Mfs Prudent 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 Mfs Prudent will offset losses from the drop in Mfs Prudent's long position.| American Balanced vs. Great West Real Estate | American Balanced vs. Fidelity Real Estate | American Balanced vs. Dunham Real Estate | American Balanced vs. Forum Real Estate |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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