Correlation Between American Balanced and Growth Fund
Can any of the company-specific risk be diversified away by investing in both American Balanced and Growth Fund 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 Growth Fund 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 Growth Fund Of, you can compare the effects of market volatilities on American Balanced and Growth Fund 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 Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Growth Fund.
Diversification Opportunities for American Balanced and Growth Fund
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Growth is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Growth Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund has no effect on the direction of American Balanced i.e., American Balanced and Growth Fund go up and down completely randomly.
Pair Corralation between American Balanced and Growth Fund
Assuming the 90 days horizon American Balanced is expected to generate 2.49 times less return on investment than Growth Fund. But when comparing it to its historical volatility, American Balanced Fund is 1.86 times less risky than Growth Fund. It trades about 0.13 of its potential returns per unit of risk. Growth Fund Of is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,905 in Growth Fund Of on August 28, 2024 and sell it today you would earn a total of 288.00 from holding Growth Fund Of or generate 3.64% 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. Growth Fund Of
Performance |
| Timeline |
| American Balanced |
| Growth Fund |
American Balanced and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Growth Fund
The main advantage of trading using opposite American Balanced and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Growth Fund 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 Growth Fund will offset losses from the drop in Growth Fund'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 |
| Growth Fund vs. Income Fund Of | Growth Fund vs. New World Fund | Growth Fund vs. American Mutual Fund | Growth Fund vs. American Mutual 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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