Correlation Between American Mutual and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both American Mutual and Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy Fund, you can compare the effects of market volatilities on American Mutual and Balanced Strategy 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 Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Balanced Strategy.
Diversification Opportunities for American Mutual and Balanced Strategy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Balanced is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of American Mutual i.e., American Mutual and Balanced Strategy go up and down completely randomly.
Pair Corralation between American Mutual and Balanced Strategy
Assuming the 90 days horizon American Mutual Fund is expected to generate 1.13 times more return on investment than Balanced Strategy. However, American Mutual is 1.13 times more volatile than Balanced Strategy Fund. It trades about 0.08 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.07 per unit of risk. If you would invest 4,709 in American Mutual Fund on September 3, 2024 and sell it today you would earn a total of 1,315 from holding American Mutual Fund or generate 27.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Balanced Strategy Fund
Performance |
| Timeline |
| American Mutual |
| Balanced Strategy |
American Mutual and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Balanced Strategy
The main advantage of trading using opposite American Mutual and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Balanced Strategy 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 Balanced Strategy will offset losses from the drop in Balanced Strategy'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 |
| Balanced Strategy vs. Dodge Cox Stock | Balanced Strategy vs. Americafirst Large Cap | Balanced Strategy vs. Fundamental Large Cap | Balanced Strategy vs. American Mutual Fund |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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