Correlation Between American Mutual and Federated Equity
Can any of the company-specific risk be diversified away by investing in both American Mutual and Federated Equity 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 Federated Equity 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 Federated Equity Income, you can compare the effects of market volatilities on American Mutual and Federated Equity 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 Federated Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Federated Equity.
Diversification Opportunities for American Mutual and Federated Equity
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Federated is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Federated Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Equity Income 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 Federated Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Equity Income has no effect on the direction of American Mutual i.e., American Mutual and Federated Equity go up and down completely randomly.
Pair Corralation between American Mutual and Federated Equity
Assuming the 90 days horizon American Mutual is expected to generate 1.62 times less return on investment than Federated Equity. But when comparing it to its historical volatility, American Mutual Fund is 1.29 times less risky than Federated Equity. It trades about 0.08 of its potential returns per unit of risk. Federated Equity Income is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,568 in Federated Equity Income on August 30, 2024 and sell it today you would earn a total of 78.00 from holding Federated Equity Income or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Federated Equity Income
Performance |
| Timeline |
| American Mutual |
| Federated Equity Income |
American Mutual and Federated Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Federated Equity
The main advantage of trading using opposite American Mutual and Federated Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Federated Equity 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 Federated Equity will offset losses from the drop in Federated Equity's long position.| American Mutual vs. Rbc Microcap Value | American Mutual vs. Falcon Focus Scv | American Mutual vs. Scharf Global Opportunity | American Mutual vs. Qs Large Cap |
| Federated Equity vs. Dodge Cox Stock | Federated Equity vs. American Mutual Fund | Federated Equity vs. American Funds American | Federated Equity vs. American Funds American |
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.
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