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 Small, 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
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and American Century Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Small 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 Small 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 is expected to generate 1.64 times less return on investment than American Century. But when comparing it to its historical volatility, Income Growth Fund is 1.67 times less risky than American Century. It trades about 0.25 of its potential returns per unit of risk. American Century Small is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,413 in American Century Small on August 29, 2024 and sell it today you would earn a total of 191.00 from holding American Century Small or generate 7.92% return on investment 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 Small
Performance |
| Timeline |
| Income Growth |
| American Century Small |
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. T Rowe Price | American Century vs. Pace Large Value | American Century vs. Dodge Cox Stock | American Century 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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