Correlation Between American Mutual and Transamerica Large
Can any of the company-specific risk be diversified away by investing in both American Mutual and Transamerica Large 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 Transamerica Large 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 Transamerica Large Cap, you can compare the effects of market volatilities on American Mutual and Transamerica Large 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 Transamerica Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Transamerica Large.
Diversification Opportunities for American Mutual and Transamerica Large
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Transamerica is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Transamerica Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Cap 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 Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Cap has no effect on the direction of American Mutual i.e., American Mutual and Transamerica Large go up and down completely randomly.
Pair Corralation between American Mutual and Transamerica Large
Assuming the 90 days horizon American Mutual Fund is expected to under-perform the Transamerica Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Mutual Fund is 1.11 times less risky than Transamerica Large. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Transamerica Large Cap is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 1,393 in Transamerica Large Cap on January 24, 2024 and sell it today you would lose (23.00) from holding Transamerica Large Cap or give up 1.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Mutual Fund vs. Transamerica Large Cap
Performance |
| Timeline |
| American Mutual |
| Transamerica Large Cap |
American Mutual and Transamerica Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Mutual and Transamerica Large
The main advantage of trading using opposite American Mutual and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Transamerica Large 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 Transamerica Large will offset losses from the drop in Transamerica Large's long position.| American Mutual vs. American Funds Fundamental | American Mutual vs. Amcap Fund Class | American Mutual vs. New Perspective Fund | American Mutual vs. American Balanced Fund |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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