Correlation Between Income Growth and American Century
Can any of the company-specific risk be diversified away by investing in both Income 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 Income 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 Income Growth Fund and American Century Mid, you can compare the effects of market volatilities on Income 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 Income Growth with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and American Century.
Diversification Opportunities for Income Growth and American Century
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Income 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 Income 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 Income 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 Income Growth i.e., Income Growth and American Century go up and down completely randomly.
Pair Corralation between Income Growth and American Century
Assuming the 90 days horizon Income Growth Fund is expected to under-perform the American Century. In addition to that, Income Growth is 1.1 times more volatile than American Century Mid. It trades about -0.07 of its total potential returns per unit of risk. American Century Mid is currently generating about -0.03 per unit of volatility. If you would invest 1,753 in American Century Mid on September 12, 2024 and sell it today you would lose (7.00) from holding American Century Mid or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Growth Fund vs. American Century Mid
Performance |
| Timeline |
| Income Growth |
| American Century Mid |
Income Growth and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and American Century
The main advantage of trading using opposite Income Growth and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income 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.| Income Growth vs. Ultra Fund I | Income Growth vs. Value Fund I | Income Growth vs. Equity Growth Fund | Income Growth vs. International Growth Fund |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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