Correlation Between American Mutual and Capital World
Can any of the company-specific risk be diversified away by investing in both American Mutual and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on American Mutual and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Capital World.
Diversification Opportunities for American Mutual and Capital World
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Capital is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of American Mutual i.e., American Mutual and Capital World go up and down completely randomly.
Pair Corralation between American Mutual and Capital World
Assuming the 90 days horizon American Mutual is expected to generate 3.05 times less return on investment than Capital World. In addition to that, American Mutual is 1.42 times more volatile than Capital World Bond. It trades about 0.06 of its total potential returns per unit of risk. Capital World Bond is currently generating about 0.28 per unit of volatility. If you would invest 1,545 in Capital World Bond on November 29, 2024 and sell it today you would earn a total of 29.00 from holding Capital World Bond or generate 1.88% 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. Capital World Bond
Performance |
| Timeline |
| American Mutual |
| Capital World Bond |
American Mutual and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Capital World
The main advantage of trading using opposite American Mutual and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| American Mutual vs. Technology Ultrasector Profund | American Mutual vs. Columbia Global Technology | American Mutual vs. Pgim Jennison Technology | American Mutual vs. Global Technology Portfolio |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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