Correlation Between Balanced Fund and Moderately Aggressive
Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Moderately Aggressive 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 Balanced Fund and Moderately Aggressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and Moderately Aggressive Balanced, you can compare the effects of market volatilities on Balanced Fund and Moderately Aggressive 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 Balanced Fund with a short position of Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Moderately Aggressive.
Diversification Opportunities for Balanced Fund and Moderately Aggressive
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Moderately is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive and Balanced Fund 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 Balanced Fund Investor are associated (or correlated) with Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Balanced Fund i.e., Balanced Fund and Moderately Aggressive go up and down completely randomly.
Pair Corralation between Balanced Fund and Moderately Aggressive
Assuming the 90 days horizon Balanced Fund is expected to generate 3.0 times less return on investment than Moderately Aggressive. But when comparing it to its historical volatility, Balanced Fund Investor is 1.15 times less risky than Moderately Aggressive. It trades about 0.05 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,195 in Moderately Aggressive Balanced on August 25, 2024 and sell it today you would earn a total of 57.00 from holding Moderately Aggressive Balanced or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Investor vs. Moderately Aggressive Balanced
Performance |
| Timeline |
| Balanced Fund Investor |
| Moderately Aggressive |
Balanced Fund and Moderately Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Moderately Aggressive
The main advantage of trading using opposite Balanced Fund and Moderately Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Moderately Aggressive 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 Moderately Aggressive will offset losses from the drop in Moderately Aggressive's long position.| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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