Correlation Between American Mutual and American Funds
Can any of the company-specific risk be diversified away by investing in both American Mutual and American Funds 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 American Funds 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 American Funds 2050, you can compare the effects of market volatilities on American Mutual and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and American Funds.
Diversification Opportunities for American Mutual and American Funds
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and American Funds 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2050 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2050 has no effect on the direction of American Mutual i.e., American Mutual and American Funds go up and down completely randomly.
Pair Corralation between American Mutual and American Funds
Assuming the 90 days horizon American Mutual is expected to generate 1.73 times less return on investment than American Funds. But when comparing it to its historical volatility, American Mutual Fund is 1.11 times less risky than American Funds. It trades about 0.06 of its potential returns per unit of risk. American Funds 2050 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,586 in American Funds 2050 on August 26, 2024 and sell it today you would earn a total of 583.00 from holding American Funds 2050 or generate 36.76% 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. American Funds 2050
Performance |
| Timeline |
| American Mutual |
| American Funds 2050 |
American Mutual and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and American Funds
The main advantage of trading using opposite American Mutual and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, American Funds 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 Funds will offset losses from the drop in American Funds' long position.| American Mutual vs. Maryland Short Term Tax Free | American Mutual vs. Jhancock Short Duration | American Mutual vs. Angel Oak Ultrashort | American Mutual vs. Rbc Short Duration |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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