Correlation Between Microsoft and American Mutual
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and American Mutual Fund, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and American Mutual.
Diversification Opportunities for Microsoft and American Mutual
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microsoft and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and American Mutual go up and down completely randomly.
Pair Corralation between Microsoft and American Mutual
Given the investment horizon of 90 days Microsoft is expected to generate 2.11 times more return on investment than American Mutual. However, Microsoft is 2.11 times more volatile than American Mutual Fund. It trades about 0.08 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.06 per unit of risk. If you would invest 33,635 in Microsoft on January 24, 2024 and sell it today you would earn a total of 6,461 from holding Microsoft or generate 19.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. American Mutual Fund
Performance |
| Timeline |
| Microsoft |
| American Mutual |
Microsoft and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and American Mutual
The main advantage of trading using opposite Microsoft and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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