Correlation Between American Mutual and Otter Creek
Can any of the company-specific risk be diversified away by investing in both American Mutual and Otter Creek 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 Otter Creek 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 Otter Creek Longshort, you can compare the effects of market volatilities on American Mutual and Otter Creek 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 Otter Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Otter Creek.
Diversification Opportunities for American Mutual and Otter Creek
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Otter is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Otter Creek Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otter Creek Longshort 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 Otter Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otter Creek Longshort has no effect on the direction of American Mutual i.e., American Mutual and Otter Creek go up and down completely randomly.
Pair Corralation between American Mutual and Otter Creek
Assuming the 90 days horizon American Mutual Fund is expected to generate 0.73 times more return on investment than Otter Creek. However, American Mutual Fund is 1.37 times less risky than Otter Creek. It trades about 0.17 of its potential returns per unit of risk. Otter Creek Longshort is currently generating about 0.09 per unit of risk. If you would invest 5,309 in American Mutual Fund on September 1, 2024 and sell it today you would earn a total of 694.00 from holding American Mutual Fund or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
American Mutual Fund vs. Otter Creek Longshort
Performance |
| Timeline |
| American Mutual |
| Otter Creek Longshort |
American Mutual and Otter Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Otter Creek
The main advantage of trading using opposite American Mutual and Otter Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Otter Creek 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 Otter Creek will offset losses from the drop in Otter Creek'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 |
| Otter Creek vs. Boston Partners Global | Otter Creek vs. Asg Managed Futures | Otter Creek vs. Pimco Trends Managed | Otter Creek vs. Aqr Long Short Equity |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |