Correlation Between American Balanced and American Mutual
Can any of the company-specific risk be diversified away by investing in both American Balanced and American Mutual 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 Balanced and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and American Mutual Fund, you can compare the effects of market volatilities on American Balanced and American Mutual 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 Balanced with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and American Mutual.
Diversification Opportunities for American Balanced and American Mutual
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and American Balanced 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 Balanced Fund are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of American Balanced i.e., American Balanced and American Mutual go up and down completely randomly.
Pair Corralation between American Balanced and American Mutual
Assuming the 90 days horizon American Balanced is expected to generate 1.03 times less return on investment than American Mutual. But when comparing it to its historical volatility, American Balanced Fund is 1.15 times less risky than American Mutual. It trades about 0.1 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,632 in American Mutual Fund on August 30, 2024 and sell it today you would earn a total of 1,379 from holding American Mutual Fund or generate 29.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. American Mutual Fund
Performance |
| Timeline |
| American Balanced |
| American Mutual |
American Balanced and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and American Mutual
The main advantage of trading using opposite American Balanced and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, American Mutual 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 American Mutual will offset losses from the drop in American Mutual's long position.| American Balanced vs. Fisher Fixed Income | American Balanced vs. Dreyfusstandish Global Fixed | American Balanced vs. Ab Select Equity | American Balanced vs. Gmo Global Equity |
| American Mutual vs. Amcap Fund Class | American Mutual vs. American Balanced Fund | American Mutual vs. New Perspective Fund | American Mutual vs. New World 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 Stocks Directory module to find actively traded stocks across global markets.
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