Correlation Between American Balanced and Virtus Dfa

Can any of the company-specific risk be diversified away by investing in both American Balanced and Virtus Dfa 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 Virtus Dfa 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 Virtus Dfa 2040, you can compare the effects of market volatilities on American Balanced and Virtus Dfa 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 Virtus Dfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Virtus Dfa.

Diversification Opportunities for American Balanced and Virtus Dfa

0.92

Correlation Coefficient

American Balanced  Virtus Dfa

Almost no diversification

The 3 months correlation between American and Virtus is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Virtus Dfa 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Dfa 2040 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 Virtus Dfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Dfa 2040 has no effect on the direction of American Balanced i.e., American Balanced and Virtus Dfa go up and down completely randomly.

Pair Corralation between American Balanced and Virtus Dfa

Assuming the 90 days horizon American Balanced Fund is expected to under-perform the Virtus Dfa. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Balanced Fund is 1.04 times less risky than Virtus Dfa. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Virtus Dfa 2040 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,049  in Virtus Dfa 2040 on December 30, 2024 and sell it today you would lose (7.00) from holding Virtus Dfa 2040 or give up 0.67% of portfolio value over 90 days.

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

American Balanced Fund  vs.  Virtus Dfa 2040

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.

Virtus Dfa 2040

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Dfa 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Virtus Dfa 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 Virtus Dfa

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

The idea behind American Balanced Fund and Virtus Dfa 2040 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 Commodity Directory module to find actively traded commodities issued by global exchanges.