Correlation Between Equity Growth and American Century
Can any of the company-specific risk be diversified away by investing in both Equity Growth and American Century 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 Equity Growth and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and American Century One, you can compare the effects of market volatilities on Equity Growth and American Century 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 Equity Growth with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and American Century.
Diversification Opportunities for Equity Growth and American Century
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Equity and American is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and American Century One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century One and Equity Growth 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 Equity Growth Fund are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century One has no effect on the direction of Equity Growth i.e., Equity Growth and American Century go up and down completely randomly.
Pair Corralation between Equity Growth and American Century
Assuming the 90 days horizon Equity Growth Fund is expected to generate 2.62 times more return on investment than American Century. However, Equity Growth is 2.62 times more volatile than American Century One. It trades about 0.13 of its potential returns per unit of risk. American Century One is currently generating about 0.15 per unit of risk. If you would invest 3,003 in Equity Growth Fund on September 2, 2024 and sell it today you would earn a total of 452.00 from holding Equity Growth Fund or generate 15.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. American Century One
Performance |
| Timeline |
| Equity Growth |
| American Century One |
Equity Growth and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and American Century
The main advantage of trading using opposite Equity Growth and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, American Century 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 Century will offset losses from the drop in American Century's long position.| Equity Growth vs. Touchstone Large Cap | Equity Growth vs. Morningstar Unconstrained Allocation | Equity Growth vs. Goldman Sachs Large | Equity Growth vs. Principal Lifetime Hybrid |
| American Century vs. Mid Cap Value | American Century vs. Equity Growth Fund | American Century vs. Income Growth Fund | American Century vs. Diversified Bond Fund |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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