Correlation Between Moderate Balanced and American Funds
Can any of the company-specific risk be diversified away by investing in both Moderate Balanced and American Funds 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 Moderate Balanced and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderate Balanced Allocation and American Funds Retirement, you can compare the effects of market volatilities on Moderate Balanced and American Funds 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 Moderate Balanced with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and American Funds.
Diversification Opportunities for Moderate Balanced and American Funds
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Moderate and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement and Moderate 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 Moderate Balanced Allocation are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and American Funds go up and down completely randomly.
Pair Corralation between Moderate Balanced and American Funds
Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 1.35 times more return on investment than American Funds. However, Moderate Balanced is 1.35 times more volatile than American Funds Retirement. It trades about 0.13 of its potential returns per unit of risk. American Funds Retirement is currently generating about 0.18 per unit of risk. If you would invest 1,176 in Moderate Balanced Allocation on October 21, 2024 and sell it today you would earn a total of 16.00 from holding Moderate Balanced Allocation or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moderate Balanced Allocation vs. American Funds Retirement
Performance |
| Timeline |
| Moderate Balanced |
| American Funds Retirement |
Moderate Balanced and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moderate Balanced and American Funds
The main advantage of trading using opposite Moderate Balanced and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Balanced position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Moderate Balanced vs. Altegris Futures Evolution | Moderate Balanced vs. Atac Inflation Rotation | Moderate Balanced vs. Ab Bond Inflation | Moderate Balanced vs. Ab Bond Inflation |
| American Funds vs. Qs Large Cap | American Funds vs. Federated Global Allocation | American Funds vs. Alternative Asset Allocation | American Funds vs. Barings Global Floating |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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