Correlation Between American Mutual and Large Company
Can any of the company-specific risk be diversified away by investing in both American Mutual and Large Company 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 Large Company 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 Large Pany Value, you can compare the effects of market volatilities on American Mutual and Large Company 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 Large Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Large Company.
Diversification Opportunities for American Mutual and Large Company
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Large is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Large Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Pany Value 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 Large Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Pany Value has no effect on the direction of American Mutual i.e., American Mutual and Large Company go up and down completely randomly.
Pair Corralation between American Mutual and Large Company
Assuming the 90 days horizon American Mutual is expected to generate 1.61 times less return on investment than Large Company. But when comparing it to its historical volatility, American Mutual Fund is 1.26 times less risky than Large Company. It trades about 0.12 of its potential returns per unit of risk. Large Pany Value is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,249 in Large Pany Value on August 28, 2024 and sell it today you would earn a total of 159.00 from holding Large Pany Value or generate 7.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Large Pany Value
Performance |
| Timeline |
| American Mutual |
| Large Pany Value |
American Mutual and Large Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Large Company
The main advantage of trading using opposite American Mutual and Large Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Large Company 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 Large Company will offset losses from the drop in Large Company's long position.| American Mutual vs. Income Fund Of | American Mutual vs. New World Fund | American Mutual vs. American Mutual Fund | American Mutual vs. American Funds Income |
| Large Company vs. Wilshire Large | Large Company vs. Small Pany Value | Large Company vs. Small Pany Growth | Large Company vs. Wilshire 5000 Index |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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