Correlation Between American Century and Core Plus
Can any of the company-specific risk be diversified away by investing in both American Century and Core Plus 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 Core Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Small and Core Plus Fund, you can compare the effects of market volatilities on American Century and Core Plus 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 Core Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Core Plus.
Diversification Opportunities for American Century and Core Plus
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Core is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Century Small and Core Plus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus Fund 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 Small are associated (or correlated) with Core Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Fund has no effect on the direction of American Century i.e., American Century and Core Plus go up and down completely randomly.
Pair Corralation between American Century and Core Plus
Assuming the 90 days horizon American Century Small is expected to generate 4.35 times more return on investment than Core Plus. However, American Century is 4.35 times more volatile than Core Plus Fund. It trades about 0.28 of its potential returns per unit of risk. Core Plus Fund is currently generating about -0.03 per unit of risk. If you would invest 2,413 in American Century Small on August 28, 2024 and sell it today you would earn a total of 203.00 from holding American Century Small or generate 8.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Small vs. Core Plus Fund
Performance |
| Timeline |
| American Century Small |
| Core Plus Fund |
American Century and Core Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Core Plus
The main advantage of trading using opposite American Century and Core Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Core Plus 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 Core Plus will offset losses from the drop in Core Plus' long position.The idea behind American Century Small and Core Plus Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Core Plus vs. Mid Cap Value | Core Plus vs. Equity Growth Fund | Core Plus vs. Income Growth Fund | Core Plus 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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