Correlation Between New World and American Mutual
Can any of the company-specific risk be diversified away by investing in both New 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 New 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 New World Fund and American Mutual Fund, you can compare the effects of market volatilities on New 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 New World with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and American Mutual.
Diversification Opportunities for New World and American Mutual
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding New 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 New 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 New 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 New World i.e., New World and American Mutual go up and down completely randomly.
Pair Corralation between New World and American Mutual
Assuming the 90 days horizon New World is expected to generate 2.37 times less return on investment than American Mutual. In addition to that, New World is 1.13 times more volatile than American Mutual Fund. It trades about 0.03 of its total potential returns per unit of risk. American Mutual Fund is currently generating about 0.08 per unit of volatility. If you would invest 5,080 in American Mutual Fund on November 3, 2024 and sell it today you would earn a total of 668.00 from holding American Mutual Fund or generate 13.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
New World Fund vs. American Mutual Fund
Performance |
| Timeline |
| New World Fund |
| American Mutual |
New World and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and American Mutual
The main advantage of trading using opposite New World and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New 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.| New World vs. Lord Abbett Health | New World vs. Deutsche Health And | New World vs. Alger Health Sciences | New World vs. The Hartford Healthcare |
| American Mutual vs. Putnam Global Financials | American Mutual vs. Gabelli Global Financial | American Mutual vs. Blackrock Financial Institutions | American Mutual vs. Blackstone Secured Lending |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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