Correlation Between American Mutual and Large-cap Value
Can any of the company-specific risk be diversified away by investing in both American Mutual and Large-cap Value 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 Large-cap Value 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 Large Cap Value Profund, you can compare the effects of market volatilities on American Mutual and Large-cap Value 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 Large-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Large-cap Value.
Diversification Opportunities for American Mutual and Large-cap Value
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Large-cap is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Large Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value 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 Large-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of American Mutual i.e., American Mutual and Large-cap Value go up and down completely randomly.
Pair Corralation between American Mutual and Large-cap Value
Assuming the 90 days horizon American Mutual is expected to generate 1.3 times less return on investment than Large-cap Value. But when comparing it to its historical volatility, American Mutual Fund is 1.23 times less risky than Large-cap Value. It trades about 0.08 of its potential returns per unit of risk. Large Cap Value Profund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8,346 in Large Cap Value Profund on August 27, 2024 and sell it today you would earn a total of 3,205 from holding Large Cap Value Profund or generate 38.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Large Cap Value Profund
Performance |
| Timeline |
| American Mutual |
| Large Cap Value |
American Mutual and Large-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Large-cap Value
The main advantage of trading using opposite American Mutual and Large-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Large-cap Value 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 Large-cap Value will offset losses from the drop in Large-cap Value'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 |
| Large-cap Value vs. Short Real Estate | Large-cap Value vs. Short Real Estate | Large-cap Value vs. Ultrashort Mid Cap Profund | Large-cap Value vs. Ultrashort Mid Cap Profund |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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