Correlation Between American Mutual and Target
Can any of the company-specific risk be diversified away by investing in both American Mutual and Target 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 American Mutual and Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Mutual Fund and Target, you can compare the effects of market volatilities on American Mutual and Target 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 American Mutual with a short position of Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Target.
Diversification Opportunities for American Mutual and Target
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Target is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and American 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 American Mutual Fund are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of American Mutual i.e., American Mutual and Target go up and down completely randomly.
Pair Corralation between American Mutual and Target
Assuming the 90 days horizon American Mutual Fund is expected to generate 0.57 times more return on investment than Target. However, American Mutual Fund is 1.74 times less risky than Target. It trades about -0.16 of its potential returns per unit of risk. Target is currently generating about -0.17 per unit of risk. If you would invest 5,332 in American Mutual Fund on January 25, 2024 and sell it today you would lose (114.00) from holding American Mutual Fund or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Mutual Fund vs. Target
Performance |
| Timeline |
| American Mutual |
| Target |
American Mutual and Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Target
The main advantage of trading using opposite American Mutual and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.| American Mutual vs. Loomis Sayles Growth | American Mutual vs. Diamond Hill Large | American Mutual vs. Champlain Small Pany | American Mutual vs. HUMANA INC |
| Target vs. Costco Wholesale Corp | Target vs. BJs Wholesale Club | Target vs. Dollar Tree | Target vs. Dollar General |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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