Correlation Between Balanced Fund and American Beacon
Can any of the company-specific risk be diversified away by investing in both Balanced Fund and American Beacon 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 American Beacon 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 American Beacon Stephens, you can compare the effects of market volatilities on Balanced Fund and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and American Beacon.
Diversification Opportunities for Balanced Fund and American Beacon
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and American is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Stephens has no effect on the direction of Balanced Fund i.e., Balanced Fund and American Beacon go up and down completely randomly.
Pair Corralation between Balanced Fund and American Beacon
Assuming the 90 days horizon Balanced Fund is expected to generate 1.32 times less return on investment than American Beacon. But when comparing it to its historical volatility, Balanced Fund Investor is 1.99 times less risky than American Beacon. It trades about 0.11 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,160 in American Beacon Stephens on September 12, 2024 and sell it today you would earn a total of 505.00 from holding American Beacon Stephens or generate 43.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Balanced Fund Investor vs. American Beacon Stephens
Performance |
| Timeline |
| Balanced Fund Investor |
| American Beacon Stephens |
Balanced Fund and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and American Beacon
The main advantage of trading using opposite Balanced Fund and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, American Beacon 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 Beacon will offset losses from the drop in American Beacon'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 |
| American Beacon vs. Needham Aggressive Growth | American Beacon vs. Ultramid Cap Profund Ultramid Cap | American Beacon vs. HUMANA INC | American Beacon vs. Barloworld Ltd ADR |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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