Correlation Between American Mutual and Lsv Conservative

Can any of the company-specific risk be diversified away by investing in both American Mutual and Lsv Conservative 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 Lsv Conservative 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 Lsv Servative Value, you can compare the effects of market volatilities on American Mutual and Lsv Conservative 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 Lsv Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Lsv Conservative.

Diversification Opportunities for American Mutual and Lsv Conservative

0.67

Correlation Coefficient

American Mutual  Lsv Conservative

Poor diversification

The 3 months correlation between American and LSV is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Lsv Servative Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsv Servative Value 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 Lsv Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsv Servative Value has no effect on the direction of American Mutual i.e., American Mutual and Lsv Conservative go up and down completely randomly.

Pair Corralation between American Mutual and Lsv Conservative

Assuming the 90 days horizon American Mutual Fund is expected to generate 0.56 times more return on investment than Lsv Conservative. However, American Mutual Fund is 1.78 times less risky than Lsv Conservative. It trades about -0.08 of its potential returns per unit of risk. Lsv Servative Value is currently generating about -0.15 per unit of risk. If you would invest  5,994  in American Mutual Fund on November 28, 2024 and sell it today you would lose (247.00) from holding American Mutual Fund or give up 4.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

American Mutual Fund  vs.  Lsv Servative Value

American Mutual

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Mutual Fund has generated negative risk-adjusted returns adding no value to fund investors. 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.

Lsv Servative Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lsv Servative Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with American Mutual and Lsv Conservative

The main advantage of trading using opposite American Mutual and Lsv Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Lsv Conservative 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 Lsv Conservative will offset losses from the drop in Lsv Conservative's long position.

The idea behind American Mutual Fund and Lsv Servative Value 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.