Correlation Between Scharf Global and American Mutual
Can any of the company-specific risk be diversified away by investing in both Scharf Global 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 Scharf Global and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scharf Global Opportunity and American Mutual Fund, you can compare the effects of market volatilities on Scharf Global 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 Scharf Global with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scharf Global and American Mutual.
Diversification Opportunities for Scharf Global and American Mutual
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Scharf and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Global Opportunity and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Scharf Global 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 Scharf Global Opportunity 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 Scharf Global i.e., Scharf Global and American Mutual go up and down completely randomly.
Pair Corralation between Scharf Global and American Mutual
Assuming the 90 days horizon Scharf Global is expected to generate 1.26 times less return on investment than American Mutual. In addition to that, Scharf Global is 1.12 times more volatile than American Mutual Fund. It trades about 0.13 of its total potential returns per unit of risk. American Mutual Fund is currently generating about 0.18 per unit of volatility. If you would invest 4,646 in American Mutual Fund on September 1, 2024 and sell it today you would earn a total of 1,412 from holding American Mutual Fund or generate 30.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scharf Global Opportunity vs. American Mutual Fund
Performance |
| Timeline |
| Scharf Global Opportunity |
| American Mutual |
Scharf Global and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scharf Global and American Mutual
The main advantage of trading using opposite Scharf Global and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scharf Global 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.| Scharf Global vs. Ab Select Equity | Scharf Global vs. Cutler Equity | Scharf Global vs. Jpmorgan Equity Income | Scharf Global vs. Multimedia Portfolio Multimedia |
| American Mutual vs. Balanced Fund Investor | American Mutual vs. Qs Growth Fund | American Mutual vs. Shelton Funds | American Mutual vs. Small Cap Stock |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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