Correlation Between Washington Mutual and American Mutual
Can any of the company-specific risk be diversified away by investing in both Washington Mutual 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 Washington Mutual and American Mutual 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 Mutual Fund, you can compare the effects of market volatilities on Washington Mutual 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 Washington Mutual with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and American Mutual.
Diversification Opportunities for Washington Mutual and American Mutual
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Washington and American is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual 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 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 Washington Mutual i.e., Washington Mutual and American Mutual go up and down completely randomly.
Pair Corralation between Washington Mutual and American Mutual
Assuming the 90 days horizon Washington Mutual is expected to generate 1.09 times less return on investment than American Mutual. In addition to that, Washington Mutual is 1.28 times more volatile than American Mutual Fund. It trades about 0.09 of its total potential returns per unit of risk. American Mutual Fund is currently generating about 0.13 per unit of volatility. If you would invest 4,806 in American Mutual Fund on September 15, 2024 and sell it today you would earn a total of 984.00 from holding American Mutual Fund or generate 20.47% 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 Mutual Fund
Performance |
| Timeline |
| Washington Mutual |
| American Mutual |
Washington Mutual and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and American Mutual
The main advantage of trading using opposite Washington Mutual and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual 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.| Washington Mutual vs. Growth Fund Of | Washington Mutual vs. Europacific Growth Fund | Washington Mutual vs. Smallcap World Fund | Washington Mutual vs. Investment Of America |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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