Correlation Between Profunds Large and American Mutual
Can any of the company-specific risk be diversified away by investing in both Profunds Large 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 Profunds Large and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Profunds Large Cap Growth and American Mutual Fund, you can compare the effects of market volatilities on Profunds Large 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 Profunds Large with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Large and American Mutual.
Diversification Opportunities for Profunds Large and American Mutual
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Profunds and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Large Cap Growth and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Profunds Large 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 Profunds Large Cap Growth 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 Profunds Large i.e., Profunds Large and American Mutual go up and down completely randomly.
Pair Corralation between Profunds Large and American Mutual
Assuming the 90 days horizon Profunds Large Cap Growth is expected to under-perform the American Mutual. In addition to that, Profunds Large is 1.98 times more volatile than American Mutual Fund. It trades about -0.1 of its total potential returns per unit of risk. American Mutual Fund is currently generating about -0.19 per unit of volatility. If you would invest 5,382 in American Mutual Fund on January 29, 2024 and sell it today you would lose (125.00) from holding American Mutual Fund or give up 2.32% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Profunds Large Cap Growth vs. American Mutual Fund
Performance |
Timeline |
Profunds Large Cap |
American Mutual |
Profunds Large and American Mutual Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Profunds Large and American Mutual
The main advantage of trading using opposite Profunds Large and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds Large 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.Profunds Large vs. Short Real Estate | Profunds Large vs. Short Real Estate | Profunds Large vs. Ultrashort Mid Cap Profund | Profunds Large vs. Ultrashort Mid Cap Profund |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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