Correlation Between Smallcap World and American Mutual
Can any of the company-specific risk be diversified away by investing in both Smallcap World 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 Smallcap World and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and American Mutual Fund, you can compare the effects of market volatilities on Smallcap World 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 Smallcap World with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and American Mutual.
Diversification Opportunities for Smallcap World and American Mutual
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World 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 Smallcap World 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 Smallcap World 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 Smallcap World i.e., Smallcap World and American Mutual go up and down completely randomly.
Pair Corralation between Smallcap World and American Mutual
Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.43 times more return on investment than American Mutual. However, Smallcap World is 1.43 times more volatile than American Mutual Fund. It trades about 0.23 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.28 per unit of risk. If you would invest 6,946 in Smallcap World Fund on September 2, 2024 and sell it today you would earn a total of 300.00 from holding Smallcap World Fund or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. American Mutual Fund
Performance |
| Timeline |
| Smallcap World |
| American Mutual |
Smallcap World and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and American Mutual
The main advantage of trading using opposite Smallcap World and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World 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.| Smallcap World vs. Income Fund Of | Smallcap World vs. New World Fund | Smallcap World vs. American Mutual Fund | Smallcap World vs. American Mutual Fund |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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