Correlation Between American Balanced and Pro-blend(r) Extended
Can any of the company-specific risk be diversified away by investing in both American Balanced and Pro-blend(r) Extended 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 Pro-blend(r) Extended 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 Pro Blend Extended Term, you can compare the effects of market volatilities on American Balanced and Pro-blend(r) Extended 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 Pro-blend(r) Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Pro-blend(r) Extended.
Diversification Opportunities for American Balanced and Pro-blend(r) Extended
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Pro-blend(r) is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Pro Blend Extended Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Extended 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 Pro-blend(r) Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Extended has no effect on the direction of American Balanced i.e., American Balanced and Pro-blend(r) Extended go up and down completely randomly.
Pair Corralation between American Balanced and Pro-blend(r) Extended
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.17 times more return on investment than Pro-blend(r) Extended. However, American Balanced is 1.17 times more volatile than Pro Blend Extended Term. It trades about 0.13 of its potential returns per unit of risk. Pro Blend Extended Term is currently generating about 0.09 per unit of risk. If you would invest 3,860 in American Balanced Fund on July 24, 2025 and sell it today you would earn a total of 59.00 from holding American Balanced Fund or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Pro Blend Extended Term
Performance |
| Timeline |
| American Balanced |
| Pro-blend(r) Extended |
American Balanced and Pro-blend(r) Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Pro-blend(r) Extended
The main advantage of trading using opposite American Balanced and Pro-blend(r) Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Pro-blend(r) Extended 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 Pro-blend(r) Extended will offset losses from the drop in Pro-blend(r) Extended's long position.| American Balanced vs. Investment Of America | American Balanced vs. Investment Of America | American Balanced vs. American Funds Fundamental | American Balanced vs. Smallcap World Fund |
| Pro-blend(r) Extended vs. Pro Blend Maximum Term | Pro-blend(r) Extended vs. Value Line Income | Pro-blend(r) Extended vs. Value Line Income | Pro-blend(r) Extended vs. Blackrock Lifepath Dynamic |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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