Correlation Between IShares MSCI and American Mutual

Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 IShares MSCI and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares MSCI USA and American Mutual Fund, you can compare the effects of market volatilities on IShares MSCI 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 IShares MSCI with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and American Mutual.

Diversification Opportunities for IShares MSCI and American Mutual

0.32

Correlation Coefficient

IShares MSCI  American Mutual

Weak diversification

The 3 months correlation between IShares and American is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and IShares MSCI 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 iShares MSCI USA 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 IShares MSCI i.e., IShares MSCI and American Mutual go up and down completely randomly.

Pair Corralation between IShares MSCI and American Mutual

Given the investment horizon of 90 days iShares MSCI USA is expected to generate 1.93 times more return on investment than American Mutual. However, IShares MSCI is 1.93 times more volatile than American Mutual Fund. It trades about 0.15 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.16 per unit of risk. If you would invest  19,448  in iShares MSCI USA on June 29, 2024 and sell it today you would earn a total of  746.00  from holding iShares MSCI USA or generate 3.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

iShares MSCI USA  vs.  American Mutual Fund

iShares MSCI USA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

American Mutual

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual Fund are ranked lower than 15 (%) 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 October 2024.

Pair Trading with IShares MSCI and American Mutual

The main advantage of trading using opposite IShares MSCI and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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.

The idea behind iShares MSCI USA and American Mutual 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.