Correlation Between American Century and American Beacon
Can any of the company-specific risk be diversified away by investing in both American Century and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Etf and American Beacon Funds, you can compare the effects of market volatilities on American Century and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and American Beacon.
Diversification Opportunities for American Century and American Beacon
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and American is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding American Century Etf and American Beacon Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Funds 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 Etf are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Funds has no effect on the direction of American Century i.e., American Century and American Beacon go up and down completely randomly.
Pair Corralation between American Century and American Beacon
Assuming the 90 days horizon American Century is expected to generate 2.09 times less return on investment than American Beacon. In addition to that, American Century is 2.07 times more volatile than American Beacon Funds. It trades about 0.05 of its total potential returns per unit of risk. American Beacon Funds is currently generating about 0.22 per unit of volatility. If you would invest 741.00 in American Beacon Funds on September 12, 2024 and sell it today you would earn a total of 117.00 from holding American Beacon Funds or generate 15.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Etf vs. American Beacon Funds
Performance |
| Timeline |
| American Century Etf |
| American Beacon Funds |
American Century and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and American Beacon
The main advantage of trading using opposite American Century and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, American Beacon 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 Beacon will offset losses from the drop in American Beacon's long position.| American Century vs. Stone Ridge Diversified | American Century vs. Elfun Diversified Fund | American Century vs. Aqr Diversified Arbitrage | American Century vs. Wealthbuilder Conservative Allocation |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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