Correlation Between American Mutual and Edgewood Growth

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Can any of the company-specific risk be diversified away by investing in both American Mutual and Edgewood Growth 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 Edgewood Growth 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 Edgewood Growth Fund, you can compare the effects of market volatilities on American Mutual and Edgewood Growth 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 Edgewood Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Edgewood Growth.

Diversification Opportunities for American Mutual and Edgewood Growth

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between American and Edgewood is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Edgewood Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewood Growth 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 Edgewood Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewood Growth has no effect on the direction of American Mutual i.e., American Mutual and Edgewood Growth go up and down completely randomly.

Pair Corralation between American Mutual and Edgewood Growth

Assuming the 90 days horizon American Mutual is expected to generate 1.19 times less return on investment than Edgewood Growth. But when comparing it to its historical volatility, American Mutual Fund is 1.56 times less risky than Edgewood Growth. It trades about 0.23 of its potential returns per unit of risk. Edgewood Growth Fund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,289  in Edgewood Growth Fund on May 7, 2025 and sell it today you would earn a total of  458.00  from holding Edgewood Growth Fund or generate 10.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

American Mutual Fund  vs.  Edgewood Growth Fund

 Performance 
       Timeline  
American Mutual 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Mutual may actually be approaching a critical reversion point that can send shares even higher in September 2025.
Edgewood Growth 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Edgewood Growth Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Edgewood Growth may actually be approaching a critical reversion point that can send shares even higher in September 2025.

American Mutual and Edgewood Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Mutual and Edgewood Growth

The main advantage of trading using opposite American Mutual and Edgewood Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Edgewood Growth 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 Edgewood Growth will offset losses from the drop in Edgewood Growth's long position.
The idea behind American Mutual Fund and Edgewood Growth Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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