Correlation Between 1919 Socially and American Balanced

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Can any of the company-specific risk be diversified away by investing in both 1919 Socially 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 1919 Socially and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1919 Socially Responsive and American Balanced Fund, you can compare the effects of market volatilities on 1919 Socially 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 1919 Socially with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1919 Socially and American Balanced.

Diversification Opportunities for 1919 Socially and American Balanced

0.99
  Correlation Coefficient

No risk reduction

The 14 months correlation between 1919 and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding 1919 SOCIALLY RESPONSIVE and AMERICAN BALANCED FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced Fund and 1919 Socially 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 1919 Socially Responsive 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 Fund has no effect on the direction of 1919 Socially i.e., 1919 Socially and American Balanced go up and down completely randomly.

Pair Corralation between 1919 Socially and American Balanced

Assuming the 90 days horizon 1919 Socially is expected to generate 1.35 times less return on investment than American Balanced. In addition to that, 1919 Socially is 1.06 times more volatile than American Balanced Fund. It trades about 0.19 of its total potential returns per unit of risk. American Balanced Fund is currently generating about 0.27 per unit of volatility. If you would invest  3,273  in American Balanced Fund on December 29, 2023 and sell it today you would earn a total of  99.00  from holding American Balanced Fund or generate 3.02% return on investment over 90 days.
Time Period14 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.65%
ValuesDaily Returns

1919 SOCIALLY RESPONSIVE  vs.  AMERICAN BALANCED FUND

 Performance 
       Timeline  
1919 Socially Responsive 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in 1919 Socially Responsive are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, 1919 Socially is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
American Balanced Fund 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Balanced Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

1919 Socially and American Balanced Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 1919 Socially and American Balanced

The main advantage of trading using opposite 1919 Socially and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1919 Socially 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.
The idea behind 1919 Socially Responsive and American Balanced Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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