Correlation Between American Mutual and Capital Income
Can any of the company-specific risk be diversified away by investing in both American Mutual and Capital Income 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 Capital Income 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 Capital Income Builder, you can compare the effects of market volatilities on American Mutual and Capital Income 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 Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Capital Income.
Diversification Opportunities for American Mutual and Capital Income
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Capital is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder 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 Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of American Mutual i.e., American Mutual and Capital Income go up and down completely randomly.
Pair Corralation between American Mutual and Capital Income
Assuming the 90 days horizon American Mutual Fund is expected to generate 1.2 times more return on investment than Capital Income. However, American Mutual is 1.2 times more volatile than Capital Income Builder. It trades about 0.09 of its potential returns per unit of risk. Capital Income Builder is currently generating about 0.08 per unit of risk. If you would invest 4,627 in American Mutual Fund on August 31, 2024 and sell it today you would earn a total of 1,376 from holding American Mutual Fund or generate 29.74% 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. Capital Income Builder
Performance |
| Timeline |
| American Mutual |
| Capital Income Builder |
American Mutual and Capital Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Capital Income
The main advantage of trading using opposite American Mutual and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Capital Income 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 Capital Income will offset losses from the drop in Capital Income's long position.| American Mutual vs. Amcap Fund Class | American Mutual vs. American Balanced Fund | American Mutual vs. New Perspective Fund | American Mutual vs. New World Fund |
| Capital Income vs. HUMANA INC | Capital Income vs. SCOR PK | Capital Income vs. Aquagold International | Capital Income vs. Thrivent 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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |