Correlation Between American Balanced and Riskproreg Dynamic

Can any of the company-specific risk be diversified away by investing in both American Balanced and Riskproreg Dynamic 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 Riskproreg Dynamic 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 Riskproreg Dynamic 20 30, you can compare the effects of market volatilities on American Balanced and Riskproreg Dynamic 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 Riskproreg Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Riskproreg Dynamic.

Diversification Opportunities for American Balanced and Riskproreg Dynamic

0.84

Correlation Coefficient

American Balanced  Riskproreg Dynamic

Very poor diversification

The 3 months correlation between American and Riskproreg is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Riskproreg Dynamic 20 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riskproreg Dynamic 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 Riskproreg Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riskproreg Dynamic has no effect on the direction of American Balanced i.e., American Balanced and Riskproreg Dynamic go up and down completely randomly.

Pair Corralation between American Balanced and Riskproreg Dynamic

Assuming the 90 days horizon American Balanced Fund is expected to under-perform the Riskproreg Dynamic. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Balanced Fund is 1.07 times less risky than Riskproreg Dynamic. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Riskproreg Dynamic 20 30 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,069  in Riskproreg Dynamic 20 30 on February 8, 2024 and sell it today you would lose (2.00) from holding Riskproreg Dynamic 20 30 or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

American Balanced Fund  vs.  Riskproreg Dynamic 20 30

American Balanced

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Balanced Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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.

Riskproreg Dynamic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Riskproreg Dynamic 20 30 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Riskproreg Dynamic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Balanced and Riskproreg Dynamic

The main advantage of trading using opposite American Balanced and Riskproreg Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Riskproreg Dynamic 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 Riskproreg Dynamic will offset losses from the drop in Riskproreg Dynamic's long position.

The idea behind American Balanced Fund and Riskproreg Dynamic 20 30 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.