Correlation Between Washington Mutual and American Balanced
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and American Balanced 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 Washington Mutual and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Mutual Investors and American Balanced Fund, you can compare the effects of market volatilities on Washington Mutual and American Balanced 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 Washington Mutual with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and American Balanced.
Diversification Opportunities for Washington Mutual and American Balanced
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Washington and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Washington Mutual 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 Washington Mutual Investors are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Washington Mutual i.e., Washington Mutual and American Balanced go up and down completely randomly.
Pair Corralation between Washington Mutual and American Balanced
Assuming the 90 days horizon Washington Mutual Investors is expected to generate 1.4 times more return on investment than American Balanced. However, Washington Mutual is 1.4 times more volatile than American Balanced Fund. It trades about 0.12 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.1 per unit of risk. If you would invest 6,462 in Washington Mutual Investors on August 30, 2024 and sell it today you would earn a total of 124.00 from holding Washington Mutual Investors or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. American Balanced Fund
Performance |
| Timeline |
| Washington Mutual |
| American Balanced |
Washington Mutual and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and American Balanced
The main advantage of trading using opposite Washington Mutual and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, American Balanced 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 Balanced will offset losses from the drop in American Balanced's long position.| Washington Mutual vs. Hennessy Large Cap | Washington Mutual vs. Fidelity Advisor Financial | Washington Mutual vs. Financial Industries Fund | Washington Mutual vs. Goldman Sachs Trust |
| American Balanced vs. Washington Mutual Investors | American Balanced vs. New Perspective Fund | American Balanced vs. Amcap Fund Class | American Balanced vs. Growth Fund Of |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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