Correlation Between American Mutual and American High
Can any of the company-specific risk be diversified away by investing in both American Mutual and American High 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 High 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 High Income, you can compare the effects of market volatilities on American Mutual and American High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and American High.
Diversification Opportunities for American Mutual and American High
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and American is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and American High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High 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 American High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Income has no effect on the direction of American Mutual i.e., American Mutual and American High go up and down completely randomly.
Pair Corralation between American Mutual and American High
Assuming the 90 days horizon American Mutual Fund is expected to generate 2.12 times more return on investment than American High. However, American Mutual is 2.12 times more volatile than American High Income. It trades about 0.08 of its potential returns per unit of risk. American High Income is currently generating about 0.14 per unit of risk. If you would invest 4,702 in American Mutual Fund on August 31, 2024 and sell it today you would earn a total of 1,220 from holding American Mutual Fund or generate 25.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. American High Income
Performance |
| Timeline |
| American Mutual |
| American High Income |
American Mutual and American High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and American High
The main advantage of trading using opposite American Mutual and American High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, American High 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 High will offset losses from the drop in American High's long position.| American Mutual vs. Harbor Vertible Securities | American Mutual vs. Virtus Convertible | American Mutual vs. Fidelity Sai Convertible | American Mutual vs. Lord Abbett Convertible |
| American High vs. Vanguard High Yield Corporate | American High vs. Vanguard High Yield Porate | American High vs. Blackrock Hi Yld | American High vs. Blackrock High Yield |
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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