Correlation Between American Balanced and Catholic Responsible

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

Diversification Opportunities for American Balanced and Catholic Responsible

0.97

Correlation Coefficient

American Balanced  Catholic Responsible

Almost no diversification

The 3 months correlation between American and Catholic is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Catholic Responsible Investmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catholic Responsible 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 Catholic Responsible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catholic Responsible has no effect on the direction of American Balanced i.e., American Balanced and Catholic Responsible go up and down completely randomly.

Pair Corralation between American Balanced and Catholic Responsible

Assuming the 90 days horizon American Balanced Fund is expected to generate 1.07 times more return on investment than Catholic Responsible. However, American Balanced is 1.07 times more volatile than Catholic Responsible Investments. It trades about 0.17 of its potential returns per unit of risk. Catholic Responsible Investments is currently generating about 0.15 per unit of risk. If you would invest  3,526  in American Balanced Fund on September 2, 2024 and sell it today you would earn a total of  175.00  from holding American Balanced Fund or generate 4.96% return on investment over 90 days.

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

American Balanced Fund  vs.  Catholic Responsible Investmen

American Balanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Balanced Fund are ranked lower than 12 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Catholic Responsible

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catholic Responsible Investments are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Catholic Responsible 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 Catholic Responsible

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

The idea behind American Balanced Fund and Catholic Responsible Investments 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.