Correlation Between New Perspective and American Mutual
Can any of the company-specific risk be diversified away by investing in both New Perspective 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 Perspective 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 Perspective Fund and American Mutual Fund, you can compare the effects of market volatilities on New Perspective 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 Perspective with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and American Mutual.
Diversification Opportunities for New Perspective and American Mutual
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective 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 Perspective 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 Perspective 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 Perspective i.e., New Perspective and American Mutual go up and down completely randomly.
Pair Corralation between New Perspective and American Mutual
Assuming the 90 days horizon New Perspective Fund is expected to generate 1.4 times more return on investment than American Mutual. However, New Perspective is 1.4 times more volatile than American Mutual Fund. It trades about 0.06 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.08 per unit of risk. If you would invest 4,779 in New Perspective Fund on August 24, 2024 and sell it today you would earn a total of 1,303 from holding New Perspective Fund or generate 27.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Perspective Fund vs. American Mutual Fund
Performance |
| Timeline |
| New Perspective |
| American Mutual |
New Perspective and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and American Mutual
The main advantage of trading using opposite New Perspective and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective 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 Perspective vs. Black Oak Emerging | New Perspective vs. Dws Emerging Markets | New Perspective vs. Origin Emerging Markets | New Perspective vs. Ashmore Emerging Markets |
| American Mutual vs. Vanguard Small Cap Value | American Mutual vs. Vanguard Mid Cap Value | American Mutual vs. Vanguard Small Cap Index | American Mutual vs. Vanguard Emerging Markets |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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