Correlation Between American Balanced and New World
Can any of the company-specific risk be diversified away by investing in both American Balanced and New World 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 New World 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 New World Fund, you can compare the effects of market volatilities on American Balanced and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and New World.
Diversification Opportunities for American Balanced and New World
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and New is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of American Balanced i.e., American Balanced and New World go up and down completely randomly.
Pair Corralation between American Balanced and New World
Assuming the 90 days horizon American Balanced Fund is expected to generate 0.8 times more return on investment than New World. However, American Balanced Fund is 1.25 times less risky than New World. It trades about 0.1 of its potential returns per unit of risk. New World Fund is currently generating about -0.21 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. New World Fund
Performance |
| Timeline |
| American Balanced |
| New World Fund |
American Balanced and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and New World
The main advantage of trading using opposite American Balanced and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, New World 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 New World will offset losses from the drop in New World'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 |
| New World vs. Qs Small Capitalization | New World vs. Small Pany Growth | New World vs. Small Midcap Dividend Income | New World vs. Growth Fund Of |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |