Correlation Between Equity Income and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Equity Income and Balanced 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 Equity Income and Balanced Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Balanced Fund I, you can compare the effects of market volatilities on Equity Income and Balanced 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 Equity Income with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Balanced Fund.
Diversification Opportunities for Equity Income and Balanced Fund
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Balanced is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Balanced Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund I and Equity Income 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 Equity Income Fund are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund I has no effect on the direction of Equity Income i.e., Equity Income and Balanced Fund go up and down completely randomly.
Pair Corralation between Equity Income and Balanced Fund
Assuming the 90 days horizon Equity Income Fund is expected to generate 1.19 times more return on investment than Balanced Fund. However, Equity Income is 1.19 times more volatile than Balanced Fund I. It trades about 0.33 of its potential returns per unit of risk. Balanced Fund I is currently generating about 0.38 per unit of risk. If you would invest 934.00 in Equity Income Fund on September 1, 2024 and sell it today you would earn a total of 34.00 from holding Equity Income Fund or generate 3.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Equity Income Fund vs. Balanced Fund I
Performance |
| Timeline |
| Equity Income |
| Balanced Fund I |
Equity Income and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Balanced Fund
The main advantage of trading using opposite Equity Income and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income position performs unexpectedly, Balanced 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.| Equity Income vs. Value Fund Investor | Equity Income vs. Heritage Fund Investor | Equity Income vs. Equity Growth Fund | Equity Income vs. Mid Cap Value |
| Balanced Fund vs. Heritage Fund I | Balanced Fund vs. Select Fund C | Balanced Fund vs. Aqr Risk Parity | Balanced Fund vs. Ab Discovery Value |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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