Correlation Between American Balanced and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both American Balanced and Amcap Fund 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 Amcap Fund 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 Amcap Fund Class, you can compare the effects of market volatilities on American Balanced and Amcap Fund 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Amcap Fund.
Diversification Opportunities for American Balanced and Amcap Fund
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Amcap is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of American Balanced i.e., American Balanced and Amcap Fund go up and down completely randomly.
Pair Corralation between American Balanced and Amcap Fund
Assuming the 90 days horizon American Balanced Fund is expected to generate 0.57 times more return on investment than Amcap Fund. However, American Balanced Fund is 1.74 times less risky than Amcap Fund. It trades about -0.24 of its potential returns per unit of risk. Amcap Fund Class is currently generating about -0.22 per unit of risk. If you would invest 3,380 in American Balanced Fund on February 1, 2024 and sell it today you would lose (103.00) from holding American Balanced Fund or give up 3.05% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Balanced Fund vs. Amcap Fund Class
Performance |
Timeline |
American Balanced |
Amcap Fund Class |
American Balanced and Amcap Fund Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Balanced and Amcap Fund
The main advantage of trading using opposite American Balanced and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Amcap Fund 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 Amcap Fund will offset losses from the drop in Amcap Fund'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 |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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