Correlation Between New Economy and American Mutual
Can any of the company-specific risk be diversified away by investing in both New Economy 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 Economy 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 Economy Fund and American Mutual Fund, you can compare the effects of market volatilities on New Economy 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 Economy with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and American Mutual.
Diversification Opportunities for New Economy and American Mutual
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding New Economy 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 Economy 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 Economy 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 Economy i.e., New Economy and American Mutual go up and down completely randomly.
Pair Corralation between New Economy and American Mutual
Assuming the 90 days horizon New Economy Fund is expected to generate 1.59 times more return on investment than American Mutual. However, New Economy is 1.59 times more volatile than American Mutual Fund. It trades about 0.09 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.09 per unit of risk. If you would invest 4,445 in New Economy Fund on August 27, 2024 and sell it today you would earn a total of 2,345 from holding New Economy Fund or generate 52.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. American Mutual Fund
Performance |
| Timeline |
| New Economy Fund |
| American Mutual |
New Economy and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and American Mutual
The main advantage of trading using opposite New Economy and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy 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 Economy vs. Jhancock Disciplined Value | New Economy vs. Qs Large Cap | New Economy vs. T Rowe Price | New Economy vs. Fisher Large Cap |
| American Mutual vs. Small Pany Growth | American Mutual vs. The Hartford Small | American Mutual vs. Touchstone Small Cap | American Mutual vs. Ab Small Cap |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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