Correlation Between American Mutual and Longleaf Partners
Can any of the company-specific risk be diversified away by investing in both American Mutual and Longleaf Partners 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 Longleaf Partners 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 Longleaf Partners Fund, you can compare the effects of market volatilities on American Mutual and Longleaf Partners 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 Longleaf Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Longleaf Partners.
Diversification Opportunities for American Mutual and Longleaf Partners
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Longleaf is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of American Mutual i.e., American Mutual and Longleaf Partners go up and down completely randomly.
Pair Corralation between American Mutual and Longleaf Partners
Assuming the 90 days horizon American Mutual Fund is expected to generate 0.69 times more return on investment than Longleaf Partners. However, American Mutual Fund is 1.45 times less risky than Longleaf Partners. It trades about 0.12 of its potential returns per unit of risk. Longleaf Partners Fund is currently generating about 0.07 per unit of risk. If you would invest 4,660 in American Mutual Fund on September 4, 2024 and sell it today you would earn a total of 1,364 from holding American Mutual Fund or generate 29.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
American Mutual Fund vs. Longleaf Partners Fund
Performance |
| Timeline |
| American Mutual |
| Longleaf Partners |
American Mutual and Longleaf Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Longleaf Partners
The main advantage of trading using opposite American Mutual and Longleaf Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Longleaf Partners 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 Longleaf Partners will offset losses from the drop in Longleaf Partners' 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 |
| Longleaf Partners vs. Goldman Sachs Financial | Longleaf Partners vs. Fidelity Advisor Financial | Longleaf Partners vs. Royce Global Financial | Longleaf Partners vs. Transamerica Financial Life |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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