Correlation Between American Mutual and Fairholme Fund
Can any of the company-specific risk be diversified away by investing in both American Mutual and Fairholme Fund 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 Mutual and Fairholme Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Mutual Fund and The Fairholme Fund, you can compare the effects of market volatilities on American Mutual and Fairholme Fund 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 Mutual with a short position of Fairholme Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Fairholme Fund.
Diversification Opportunities for American Mutual and Fairholme Fund
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Fairholme is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and The Fairholme Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairholme Fund and American Mutual 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 Mutual Fund are associated (or correlated) with Fairholme Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairholme Fund has no effect on the direction of American Mutual i.e., American Mutual and Fairholme Fund go up and down completely randomly.
Pair Corralation between American Mutual and Fairholme Fund
Assuming the 90 days horizon American Mutual Fund is expected to generate 0.47 times more return on investment than Fairholme Fund. However, American Mutual Fund is 2.14 times less risky than Fairholme Fund. It trades about -0.06 of its potential returns per unit of risk. The Fairholme Fund is currently generating about -0.32 per unit of risk. If you would invest 6,003 in American Mutual Fund on September 13, 2024 and sell it today you would lose (77.00) from holding American Mutual Fund or give up 1.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. The Fairholme Fund
Performance |
| Timeline |
| American Mutual |
| Fairholme Fund |
American Mutual and Fairholme Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Fairholme Fund
The main advantage of trading using opposite American Mutual and Fairholme Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Fairholme Fund 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 Fairholme Fund will offset losses from the drop in Fairholme Fund's long position.| American Mutual vs. Versatile Bond Portfolio | American Mutual vs. T Rowe Price | American Mutual vs. T Rowe Price | American Mutual vs. Dws Government Money |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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