Correlation Between American Mutual and Dodge Stock
Can any of the company-specific risk be diversified away by investing in both American Mutual and Dodge Stock 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 Dodge Stock 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 Dodge Stock Fund, you can compare the effects of market volatilities on American Mutual and Dodge Stock 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 Dodge Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Dodge Stock.
Diversification Opportunities for American Mutual and Dodge Stock
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Dodge is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Dodge Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Stock Fund 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 Dodge Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Stock Fund has no effect on the direction of American Mutual i.e., American Mutual and Dodge Stock go up and down completely randomly.
Pair Corralation between American Mutual and Dodge Stock
Assuming the 90 days horizon American Mutual Fund is expected to under-perform the Dodge Stock. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Mutual Fund is 1.02 times less risky than Dodge Stock. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Dodge Stock Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 25,415 in Dodge Stock Fund on January 25, 2024 and sell it today you would lose (38.00) from holding Dodge Stock Fund or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Dodge Stock Fund
Performance |
| Timeline |
| American Mutual |
| Dodge Stock Fund |
American Mutual and Dodge Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Dodge Stock
The main advantage of trading using opposite American Mutual and Dodge Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Dodge Stock 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 Dodge Stock will offset losses from the drop in Dodge Stock's long position.| American Mutual vs. Edgewood Growth Fund | American Mutual vs. Hartford Schroders Emerging | American Mutual vs. HUMANA INC | American Mutual vs. Aquagold International |
| Dodge Stock vs. Edgewood Growth Fund | Dodge Stock vs. Hartford Schroders Emerging | Dodge Stock vs. HUMANA INC | Dodge Stock vs. Aquagold International |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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