Correlation Between Income Fund and American Mutual
Can any of the company-specific risk be diversified away by investing in both Income Fund 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 Income Fund and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and American Mutual Fund, you can compare the effects of market volatilities on Income Fund 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 Income Fund with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and American Mutual.
Diversification Opportunities for Income Fund and American Mutual
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Income 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 Income Fund Of 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 Income Fund i.e., Income Fund and American Mutual go up and down completely randomly.
Pair Corralation between Income Fund and American Mutual
Assuming the 90 days horizon Income Fund is expected to generate 1.31 times less return on investment than American Mutual. But when comparing it to its historical volatility, Income Fund Of is 1.24 times less risky than American Mutual. It trades about 0.08 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,701 in American Mutual Fund on August 24, 2024 and sell it today you would earn a total of 1,260 from holding American Mutual Fund or generate 26.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Of vs. American Mutual Fund
Performance |
| Timeline |
| Income Fund |
| American Mutual |
Income Fund and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and American Mutual
The main advantage of trading using opposite Income Fund and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund 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.| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced | Income Fund vs. American Funds Fundamental |
| American Mutual vs. Vanguard Small Cap Value | American Mutual vs. Vanguard Mid Cap Value | American Mutual vs. Vanguard Small Cap Index | American Mutual vs. Vanguard Emerging Markets |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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