Can any of the company-specific risk be diversified away by investing in both American Mutual and Cb 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 Cb 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 Cb Large Cap, you can compare the effects of market volatilities on American Mutual and Cb 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 Cb Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Cb Large.
Diversification Opportunities for American Mutual and Cb Large
The 3 months correlation between American and CBLSX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Cb Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cb 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 Cb Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cb Large Cap has no effect on the direction of American Mutual i.e., American Mutual and Cb Large go up and down completely randomly.
Pair Corralation between American Mutual and Cb Large
Assuming the 90 days horizon American Mutual is expected to generate 2.27 times less return on investment than Cb Large. But when comparing it to its historical volatility, American Mutual Fund is 1.1 times less risky than Cb Large. It trades about 0.07 of its potential returns per unit of risk. Cb Large Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,209 in Cb Large Cap on March 5, 2024 and sell it today you would earn a total of 70.00 from holding Cb Large Cap or generate 5.79% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Cb Large Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cb Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.