Correlation Between Artisan Thematic and American Balanced

Can any of the company-specific risk be diversified away by investing in both Artisan Thematic 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 Artisan Thematic and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Artisan Thematic Fund and American Balanced Fund, you can compare the effects of market volatilities on Artisan Thematic 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 Artisan Thematic with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artisan Thematic and American Balanced.

Diversification Opportunities for Artisan Thematic and American Balanced

0.63

Correlation Coefficient

Artisan Thematic  American Balanced

Poor diversification

The 3 months correlation between Artisan and American is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Thematic Fund and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Artisan Thematic 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 Artisan Thematic 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 Artisan Thematic i.e., Artisan Thematic and American Balanced go up and down completely randomly.

Pair Corralation between Artisan Thematic and American Balanced

Assuming the 90 days horizon Artisan Thematic Fund is expected to under-perform the American Balanced. In addition to that, Artisan Thematic is 2.38 times more volatile than American Balanced Fund. It trades about -0.08 of its total potential returns per unit of risk. American Balanced Fund is currently generating about -0.07 per unit of volatility. If you would invest  3,640  in American Balanced Fund on December 2, 2024 and sell it today you would lose (141.00) from holding American Balanced Fund or give up 3.87% of portfolio value over 90 days.

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

Artisan Thematic Fund  vs.  American Balanced Fund

Artisan Thematic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Artisan Thematic Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Artisan Thematic and American Balanced

The main advantage of trading using opposite Artisan Thematic and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan Thematic 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.

The idea behind Artisan Thematic Fund and American Balanced Fund 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.