Correlation Between American Century and Equity Growth
Can any of the company-specific risk be diversified away by investing in both American Century and Equity Growth 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 Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Mid and Equity Growth Fund, you can compare the effects of market volatilities on American Century and Equity Growth 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 Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Equity Growth.
Diversification Opportunities for American Century and Equity Growth
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Equity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Century Mid and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth 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 Mid are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of American Century i.e., American Century and Equity Growth go up and down completely randomly.
Pair Corralation between American Century and Equity Growth
Assuming the 90 days horizon American Century is expected to generate 1.32 times less return on investment than Equity Growth. In addition to that, American Century is 1.04 times more volatile than Equity Growth Fund. It trades about 0.28 of its total potential returns per unit of risk. Equity Growth Fund is currently generating about 0.39 per unit of volatility. If you would invest 3,268 in Equity Growth Fund on September 5, 2024 and sell it today you would earn a total of 209.00 from holding Equity Growth Fund or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Mid vs. Equity Growth Fund
Performance |
| Timeline |
| American Century Mid |
| Equity Growth |
American Century and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Equity Growth
The main advantage of trading using opposite American Century and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Equity Growth 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| American Century vs. Equity Growth Fund | American Century vs. Income Growth Fund | American Century vs. Diversified Bond Fund | American Century vs. Emerging Markets Fund |
| Equity Growth vs. Income Growth Fund | Equity Growth vs. Equity Income Fund | Equity Growth vs. International Growth Fund | Equity Growth vs. Value Fund Investor |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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