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 Mid, 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
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and American is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and American Century Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Mid 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 Mid 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 1.09 times more return on investment than American Century. However, Equity Growth is 1.09 times more volatile than American Century Mid. It trades about 0.07 of its potential returns per unit of risk. American Century Mid is currently generating about -0.03 per unit of risk. If you would invest 3,441 in Equity Growth Fund on September 12, 2024 and sell it today you would earn a total of 28.00 from holding Equity Growth Fund or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. American Century Mid
Performance |
| Timeline |
| Equity Growth |
| American Century Mid |
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. Ab Global Risk | Equity Growth vs. Ab Global Risk | Equity Growth vs. Legg Mason Global | Equity Growth vs. Barings Global Floating |
| American Century vs. Fidelity Advisor Diversified | American Century vs. Aqr Diversified Arbitrage | American Century vs. Stone Ridge Diversified | American Century vs. Delaware Limited Term Diversified |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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