Correlation Between American Mutual and Tax Managed

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Can any of the company-specific risk be diversified away by investing in both American Mutual and Tax Managed 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 Tax Managed 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 Tax Managed Large Cap, you can compare the effects of market volatilities on American Mutual and Tax Managed 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 Tax Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Tax Managed.

Diversification Opportunities for American Mutual and Tax Managed

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between American and Tax is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Large 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 Tax Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of American Mutual i.e., American Mutual and Tax Managed go up and down completely randomly.

Pair Corralation between American Mutual and Tax Managed

Assuming the 90 days horizon American Mutual is expected to generate 1.02 times less return on investment than Tax Managed. But when comparing it to its historical volatility, American Mutual Fund is 1.37 times less risky than Tax Managed. It trades about 0.14 of its potential returns per unit of risk. Tax Managed Large Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,930  in Tax Managed Large Cap on September 12, 2024 and sell it today you would earn a total of  836.00  from holding Tax Managed Large Cap or generate 10.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

American Mutual Fund  vs.  Tax Managed Large Cap

 Performance 
       Timeline  
American Mutual 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Tax Managed Large 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tax Managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Mutual and Tax Managed Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Mutual and Tax Managed

The main advantage of trading using opposite American Mutual and Tax Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Tax Managed 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 Tax Managed will offset losses from the drop in Tax Managed's long position.
The idea behind American Mutual Fund and Tax Managed Large Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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