Correlation Between American Mutual and Towpath Focus
Can any of the company-specific risk be diversified away by investing in both American Mutual and Towpath Focus 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 Towpath Focus 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 Towpath Focus, you can compare the effects of market volatilities on American Mutual and Towpath Focus 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 Towpath Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Towpath Focus.
Diversification Opportunities for American Mutual and Towpath Focus
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Towpath is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Towpath Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towpath Focus 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 Towpath Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towpath Focus has no effect on the direction of American Mutual i.e., American Mutual and Towpath Focus go up and down completely randomly.
Pair Corralation between American Mutual and Towpath Focus
Assuming the 90 days horizon American Mutual is expected to generate 1.68 times less return on investment than Towpath Focus. In addition to that, American Mutual is 1.01 times more volatile than Towpath Focus. It trades about 0.14 of its total potential returns per unit of risk. Towpath Focus is currently generating about 0.24 per unit of volatility. If you would invest 1,575 in Towpath Focus on August 29, 2024 and sell it today you would earn a total of 54.00 from holding Towpath Focus or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Towpath Focus
Performance |
| Timeline |
| American Mutual |
| Towpath Focus |
American Mutual and Towpath Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Towpath Focus
The main advantage of trading using opposite American Mutual and Towpath Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Towpath Focus 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 Towpath Focus will offset losses from the drop in Towpath Focus' long position.| American Mutual vs. Multisector Bond Sma | American Mutual vs. Sterling Capital Short | American Mutual vs. Nebraska Municipal Fund | American Mutual vs. Artisan High Income |
| Towpath Focus vs. Prudential Jennison Financial | Towpath Focus vs. Versatile Bond Portfolio | Towpath Focus vs. Dws Government Money | Towpath Focus vs. Barings Active Short |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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