Correlation Between Balanced Fund and Intermediate Term

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

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

Diversification Opportunities for Balanced Fund and Intermediate Term

0.01

Correlation Coefficient

Balanced Fund  Intermediate Term

Significant diversification

The 3 months correlation between Balanced and Intermediate is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax and Balanced Fund 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 Balanced Fund Investor are associated (or correlated) with Intermediate Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Balanced Fund i.e., Balanced Fund and Intermediate Term go up and down completely randomly.

Pair Corralation between Balanced Fund and Intermediate Term

Assuming the 90 days horizon Balanced Fund Investor is expected to generate 2.3 times more return on investment than Intermediate Term. However, Balanced Fund is 2.3 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.14 of its potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.03 per unit of risk. If you would invest  1,947  in Balanced Fund Investor on September 2, 2024 and sell it today you would earn a total of  81.00  from holding Balanced Fund Investor or generate 4.16% return on investment over 90 days.

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

Balanced Fund Investor  vs.  Intermediate Term Tax Free Bon

Balanced Fund Investor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intermediate Term Tax

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Tax Free Bond are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Intermediate Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and Intermediate Term

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

The idea behind Balanced Fund Investor and Intermediate Term Tax Free Bond 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.