Correlation Between American Balanced and Europacific Growth
Can any of the company-specific risk be diversified away by investing in both American Balanced and Europacific Growth 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 Europacific Growth 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 Europacific Growth Fund, you can compare the effects of market volatilities on American Balanced and Europacific Growth 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 Europacific Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Europacific Growth.
Diversification Opportunities for American Balanced and Europacific Growth
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Europacific is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth 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 Europacific Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europacific Growth has no effect on the direction of American Balanced i.e., American Balanced and Europacific Growth go up and down completely randomly.
Pair Corralation between American Balanced and Europacific Growth
Assuming the 90 days horizon American Balanced Fund is expected to generate 0.74 times more return on investment than Europacific Growth. However, American Balanced Fund is 1.35 times less risky than Europacific Growth. It trades about 0.1 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about -0.12 per unit of risk. If you would invest 3,636 in American Balanced Fund on August 30, 2024 and sell it today you would earn a total of 44.00 from holding American Balanced Fund or generate 1.21% 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. Europacific Growth Fund
Performance |
| Timeline |
| American Balanced |
| Europacific Growth |
American Balanced and Europacific Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Europacific Growth
The main advantage of trading using opposite American Balanced and Europacific Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Europacific Growth 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 Europacific Growth will offset losses from the drop in Europacific Growth's long position.| American Balanced vs. Washington Mutual Investors | American Balanced vs. New Perspective Fund | American Balanced vs. Amcap Fund Class | American Balanced vs. Growth Fund Of |
| Europacific Growth vs. Growth Fund Of | Europacific Growth vs. Vanguard Institutional Index | Europacific Growth vs. Vanguard Mid Cap Index | Europacific Growth vs. Washington Mutual Investors |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |