Correlation Between Plumb Balanced and American Balanced
Can any of the company-specific risk be diversified away by investing in both Plumb Balanced and American Balanced 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 Plumb Balanced and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plumb Balanced Fund and American Balanced, you can compare the effects of market volatilities on Plumb Balanced and American Balanced 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 Plumb Balanced with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plumb Balanced and American Balanced.
Diversification Opportunities for Plumb Balanced and American Balanced
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Plumb and American is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Plumb Balanced Fund and American Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Plumb 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 Plumb Balanced Fund are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Plumb Balanced i.e., Plumb Balanced and American Balanced go up and down completely randomly.
Pair Corralation between Plumb Balanced and American Balanced
Assuming the 90 days horizon Plumb Balanced Fund is expected to generate 1.25 times more return on investment than American Balanced. However, Plumb Balanced is 1.25 times more volatile than American Balanced. It trades about 0.02 of its potential returns per unit of risk. American Balanced is currently generating about 0.03 per unit of risk. If you would invest 3,669 in Plumb Balanced Fund on January 25, 2024 and sell it today you would earn a total of 22.00 from holding Plumb Balanced Fund or generate 0.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Plumb Balanced Fund vs. American Balanced
Performance |
Timeline |
Plumb Balanced |
American Balanced |
Plumb Balanced and American Balanced Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Plumb Balanced and American Balanced
The main advantage of trading using opposite Plumb Balanced and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plumb Balanced position performs unexpectedly, American Balanced 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 Balanced will offset losses from the drop in American Balanced's long position.Plumb Balanced vs. Fidelity Strategic Dividend | Plumb Balanced vs. HUMANA INC | Plumb Balanced vs. Aquagold International | Plumb Balanced vs. Morningstar Unconstrained Allocation |
American Balanced vs. Fidelity Strategic Dividend | American Balanced vs. HUMANA INC | American Balanced vs. Aquagold International | American Balanced vs. Morningstar Unconstrained Allocation |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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