Correlation Between Growth Balanced and American Balanced
Can any of the company-specific risk be diversified away by investing in both Growth 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 Growth 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 Growth Balanced Fund and American Balanced Fund, you can compare the effects of market volatilities on Growth 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 Growth Balanced with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Balanced and American Balanced.
Diversification Opportunities for Growth Balanced and American Balanced
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Growth Balanced Fund and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Growth 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 Growth 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 Growth Balanced i.e., Growth Balanced and American Balanced go up and down completely randomly.
Pair Corralation between Growth Balanced and American Balanced
If you would invest 3,833 in Growth Balanced Fund on January 25, 2024 and sell it today you would earn a total of 0.00 from holding Growth Balanced Fund or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 4.55% |
Values | Daily Returns |
Growth Balanced Fund vs. American Balanced Fund
Performance |
Timeline |
Growth Balanced |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
American Balanced |
Growth Balanced and American Balanced Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Growth Balanced and American Balanced
The main advantage of trading using opposite Growth Balanced and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth 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.Growth Balanced vs. Franklin High Income | Growth Balanced vs. California High Yield Municipal | Growth Balanced vs. Nuveen Municipal High | Growth Balanced vs. Copeland Risk Managed |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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