Correlation Between American Century and Western Asset
Can any of the company-specific risk be diversified away by investing in both American Century and Western Asset 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 Century and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Diversified and Western Asset Diversified, you can compare the effects of market volatilities on American Century and Western Asset 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 Century with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Western Asset.
Diversification Opportunities for American Century and Western Asset
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Western is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Century Diversified and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and American Century 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 Century Diversified are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Diversified has no effect on the direction of American Century i.e., American Century and Western Asset go up and down completely randomly.
Pair Corralation between American Century and Western Asset
Assuming the 90 days horizon American Century Diversified is expected to under-perform the Western Asset. In addition to that, American Century is 1.2 times more volatile than Western Asset Diversified. It trades about -0.05 of its total potential returns per unit of risk. Western Asset Diversified is currently generating about -0.04 per unit of volatility. If you would invest 1,559 in Western Asset Diversified on September 2, 2024 and sell it today you would lose (10.00) from holding Western Asset Diversified or give up 0.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Diversified vs. Western Asset Diversified
Performance |
| Timeline |
| American Century Div |
| Western Asset Diversified |
American Century and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Western Asset
The main advantage of trading using opposite American Century and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| American Century vs. Mid Cap Value | American Century vs. Equity Growth Fund | American Century vs. Income Growth Fund | American Century vs. Diversified Bond Fund |
| Western Asset vs. Morningstar Unconstrained Allocation | Western Asset vs. Old Westbury Large | Western Asset vs. T Rowe Price | Western Asset vs. Enhanced Large Pany |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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