Correlation Between American Balanced and Timothy Conservative
Can any of the company-specific risk be diversified away by investing in both American Balanced and Timothy Conservative 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 Timothy Conservative 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 Timothy Servative Growth, you can compare the effects of market volatilities on American Balanced and Timothy Conservative 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 Timothy Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Timothy Conservative.
Diversification Opportunities for American Balanced and Timothy Conservative
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Timothy is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Timothy Servative Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Servative Growth 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 Timothy Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Servative Growth has no effect on the direction of American Balanced i.e., American Balanced and Timothy Conservative go up and down completely randomly.
Pair Corralation between American Balanced and Timothy Conservative
Assuming the 90 days horizon American Balanced Fund is expected to generate 1.09 times more return on investment than Timothy Conservative. However, American Balanced is 1.09 times more volatile than Timothy Servative Growth. It trades about 0.35 of its potential returns per unit of risk. Timothy Servative Growth is currently generating about 0.23 per unit of risk. If you would invest 3,347 in American Balanced Fund on April 25, 2025 and sell it today you would earn a total of 338.00 from holding American Balanced Fund or generate 10.1% 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. Timothy Servative Growth
Performance |
| Timeline |
| American Balanced |
| Timothy Servative Growth |
American Balanced and Timothy Conservative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Timothy Conservative
The main advantage of trading using opposite American Balanced and Timothy Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Timothy Conservative 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 Timothy Conservative will offset losses from the drop in Timothy Conservative's long position.The idea behind American Balanced Fund and Timothy Servative Growth 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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