Correlation Between Growth Income and American Balanced
Can any of the company-specific risk be diversified away by investing in both Growth Income 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 Income 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 Income Fund and American Balanced, you can compare the effects of market volatilities on Growth Income 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 Income with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Income and American Balanced.
Diversification Opportunities for Growth Income and American Balanced
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and American is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Growth Income Fund and American Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Growth Income 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 Income 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 Income i.e., Growth Income and American Balanced go up and down completely randomly.
Pair Corralation between Growth Income and American Balanced
Assuming the 90 days horizon Growth Income Fund is expected to generate 1.3 times more return on investment than American Balanced. However, Growth Income is 1.3 times more volatile than American Balanced. It trades about 0.07 of its potential returns per unit of risk. American Balanced is currently generating about 0.06 per unit of risk. If you would invest 2,432 in Growth Income Fund on February 7, 2024 and sell it today you would earn a total of 76.00 from holding Growth Income Fund or generate 3.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Growth Income Fund vs. American Balanced
Performance |
Timeline |
Growth Income |
American Balanced |
Growth Income and American Balanced Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Growth Income and American Balanced
The main advantage of trading using opposite Growth Income and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Income 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 Income vs. Income Fund Income | Growth Income vs. Victory Tax Exempt Fund | Growth Income vs. Victory Strategic Allocation | Growth Income vs. Victory Integrity Discovery |
American Balanced vs. New World Fund | American Balanced vs. American Mutual Fund | American Balanced vs. American Mutual Fund | American Balanced vs. American Funds Income |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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