Correlation Between The Arbitrage and American Mutual
Can any of the company-specific risk be diversified away by investing in both The Arbitrage and American Mutual 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 The Arbitrage and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Arbitrage Credit and American Mutual Fund, you can compare the effects of market volatilities on The Arbitrage and American Mutual 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 The Arbitrage with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Arbitrage and American Mutual.
Diversification Opportunities for The Arbitrage and American Mutual
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between The and American is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Credit and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and The Arbitrage 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 The Arbitrage Credit are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of The Arbitrage i.e., The Arbitrage and American Mutual go up and down completely randomly.
Pair Corralation between The Arbitrage and American Mutual
Assuming the 90 days horizon The Arbitrage Credit is not expected to generate positive returns. However, The Arbitrage Credit is 10.65 times less risky than American Mutual. It waists most of its returns potential to compensate for thr risk taken. American Mutual is generating about 0.32 per unit of risk. If you would invest 5,792 in American Mutual Fund on September 3, 2024 and sell it today you would earn a total of 232.00 from holding American Mutual Fund or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Arbitrage Credit vs. American Mutual Fund
Performance |
| Timeline |
| Arbitrage Credit |
| American Mutual |
The Arbitrage and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Arbitrage and American Mutual
The main advantage of trading using opposite The Arbitrage and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Arbitrage position performs unexpectedly, American Mutual 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 American Mutual will offset losses from the drop in American Mutual's long position.| The Arbitrage vs. Blackrock Strategic Opps | The Arbitrage vs. Blackrock Strategic Income | The Arbitrage vs. Jpmorgan Strategic Income | The Arbitrage vs. Jpmorgan Strategic Income |
| American Mutual vs. Amcap Fund Class | American Mutual vs. American Balanced Fund | American Mutual vs. New Perspective Fund | American Mutual vs. New World Fund |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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