Correlation Between American Balanced and Stone Harbor
Can any of the company-specific risk be diversified away by investing in both American Balanced and Stone Harbor 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 Stone Harbor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and Stone Harbor Emerging, you can compare the effects of market volatilities on American Balanced and Stone Harbor 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 Stone Harbor. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Stone Harbor.
Diversification Opportunities for American Balanced and Stone Harbor
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Stone is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Stone Harbor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Harbor Emerging 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 Fund are associated (or correlated) with Stone Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Harbor Emerging has no effect on the direction of American Balanced i.e., American Balanced and Stone Harbor go up and down completely randomly.
Pair Corralation between American Balanced and Stone Harbor
Assuming the 90 days horizon American Balanced Fund is expected to generate 0.72 times more return on investment than Stone Harbor. However, American Balanced Fund is 1.39 times less risky than Stone Harbor. It trades about 0.03 of its potential returns per unit of risk. Stone Harbor Emerging is currently generating about -0.02 per unit of risk. If you would invest 2,955 in American Balanced Fund on January 24, 2024 and sell it today you would earn a total of 296.00 from holding American Balanced Fund or generate 10.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Stone Harbor Emerging
Performance |
| Timeline |
| American Balanced |
| Stone Harbor Emerging |
American Balanced and Stone Harbor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Stone Harbor
The main advantage of trading using opposite American Balanced and Stone Harbor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Stone Harbor 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 Stone Harbor will offset losses from the drop in Stone Harbor's long position.| American Balanced vs. Income Fund Of | American Balanced vs. New World Fund | American Balanced vs. American Mutual Fund | American Balanced vs. American Mutual Fund |
| Stone Harbor vs. Vanguard Total Stock | Stone Harbor vs. Vanguard 500 Index | Stone Harbor vs. Vanguard Total Stock | Stone Harbor vs. Vanguard Total Stock |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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