Correlation Between American Balanced and Catalyst/smh Total
Can any of the company-specific risk be diversified away by investing in both American Balanced and Catalyst/smh Total 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 Catalyst/smh Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Catalystsmh Total Return, you can compare the effects of market volatilities on American Balanced and Catalyst/smh Total 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 Catalyst/smh Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Catalyst/smh Total.
Diversification Opportunities for American Balanced and Catalyst/smh Total
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Catalyst/smh is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Catalystsmh Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh Total Return 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 are associated (or correlated) with Catalyst/smh Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh Total Return has no effect on the direction of American Balanced i.e., American Balanced and Catalyst/smh Total go up and down completely randomly.
Pair Corralation between American Balanced and Catalyst/smh Total
Assuming the 90 days horizon American Balanced is expected to under-perform the Catalyst/smh Total. In addition to that, American Balanced is 1.5 times more volatile than Catalystsmh Total Return. It trades about -0.16 of its total potential returns per unit of risk. Catalystsmh Total Return is currently generating about -0.05 per unit of volatility. If you would invest 471.00 in Catalystsmh Total Return on January 25, 2024 and sell it today you would lose (2.00) from holding Catalystsmh Total Return or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced vs. Catalystsmh Total Return
Performance |
| Timeline |
| American Balanced |
| Catalystsmh Total Return |
American Balanced and Catalyst/smh Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Catalyst/smh Total
The main advantage of trading using opposite American Balanced and Catalyst/smh Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Catalyst/smh Total 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 Catalyst/smh Total will offset losses from the drop in Catalyst/smh Total's long position.| American Balanced vs. Fidelity Strategic Dividend | American Balanced vs. HUMANA INC | American Balanced vs. Aquagold International | American Balanced vs. Morningstar Unconstrained Allocation |
| Catalyst/smh Total vs. Vanguard Wellesley Income | Catalyst/smh Total vs. Blackrock Multi Asset Income | Catalyst/smh Total vs. The Hartford Balanced | Catalyst/smh Total vs. The Hartford Balanced |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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