Correlation Between American Mutual and Oakmark Select

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

Diversification Opportunities for American Mutual and Oakmark Select

0.21

Correlation Coefficient

American Mutual  Oakmark Select

Modest diversification

The 3 months correlation between American and Oakmark is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Oakmark Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Select 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 Oakmark Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Select has no effect on the direction of American Mutual i.e., American Mutual and Oakmark Select go up and down completely randomly.

Pair Corralation between American Mutual and Oakmark Select

Assuming the 90 days horizon American Mutual is expected to generate 2.5 times less return on investment than Oakmark Select. But when comparing it to its historical volatility, American Mutual Fund is 1.6 times less risky than Oakmark Select. It trades about 0.06 of its potential returns per unit of risk. Oakmark Select is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,978  in Oakmark Select on September 26, 2024 and sell it today you would earn a total of  3,062  from holding Oakmark Select or generate 61.51% return on investment over 90 days.

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

American Mutual Fund  vs.  Oakmark Select

American Mutual

Risk-Adjusted Performance

0 of 100

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.

Oakmark Select

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Oakmark Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Mutual and Oakmark Select

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

The idea behind American Mutual Fund and Oakmark Select 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.