Correlation Between American Balanced and Sentinel Balanced
Can any of the company-specific risk be diversified away by investing in both American Balanced and Sentinel 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 American Balanced and Sentinel Balanced 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 Sentinel Balanced Fund, you can compare the effects of market volatilities on American Balanced and Sentinel 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 American Balanced with a short position of Sentinel Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Sentinel Balanced.
Diversification Opportunities for American Balanced and Sentinel Balanced
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Sentinel is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Sentinel Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Balanced 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 Sentinel Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Balanced has no effect on the direction of American Balanced i.e., American Balanced and Sentinel Balanced go up and down completely randomly.
Pair Corralation between American Balanced and Sentinel Balanced
Assuming the 90 days horizon American Balanced is expected to generate 1.03 times less return on investment than Sentinel Balanced. In addition to that, American Balanced is 1.01 times more volatile than Sentinel Balanced Fund. It trades about 0.12 of its total potential returns per unit of risk. Sentinel Balanced Fund is currently generating about 0.12 per unit of volatility. If you would invest 2,818 in Sentinel Balanced Fund on August 31, 2024 and sell it today you would earn a total of 39.00 from holding Sentinel Balanced Fund or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Sentinel Balanced Fund
Performance |
| Timeline |
| American Balanced |
| Sentinel Balanced |
American Balanced and Sentinel Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Sentinel Balanced
The main advantage of trading using opposite American Balanced and Sentinel Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Sentinel 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 Sentinel Balanced will offset losses from the drop in Sentinel Balanced's long position.| American Balanced vs. American Funds American | American Balanced vs. American Funds American | American Balanced vs. American Balanced | American Balanced vs. American Balanced Fund |
| Sentinel Balanced vs. Sentinel Balanced Fund | Sentinel Balanced vs. Sentinel Balanced Fund | Sentinel Balanced vs. Fidelity Worldwide Fund | Sentinel Balanced vs. Franklin Growth Allocation |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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