Correlation Between American Mutual and New World
Can any of the company-specific risk be diversified away by investing in both American Mutual and New World 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 New World 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 New World Fund, you can compare the effects of market volatilities on American Mutual and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and New World.
Diversification Opportunities for American Mutual and New World
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and New is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of American Mutual i.e., American Mutual and New World go up and down completely randomly.
Pair Corralation between American Mutual and New World
Assuming the 90 days horizon American Mutual Fund is expected to generate 0.99 times more return on investment than New World. However, American Mutual Fund is 1.01 times less risky than New World. It trades about 0.11 of its potential returns per unit of risk. New World Fund is currently generating about -0.2 per unit of risk. If you would invest 5,818 in American Mutual Fund on August 29, 2024 and sell it today you would earn a total of 92.00 from holding American Mutual Fund or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Mutual Fund vs. New World Fund
Performance |
| Timeline |
| American Mutual |
| New World Fund |
American Mutual and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and New World
The main advantage of trading using opposite American Mutual and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| American Mutual vs. Hartford Moderate Allocation | American Mutual vs. Alternative Asset Allocation | American Mutual vs. Dodge Cox Stock | American Mutual vs. Goldman Sachs Large |
| New World vs. Touchstone Large Cap | New World vs. Pace Large Value | New World vs. American Mutual Fund | New World vs. Qs Large Cap |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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