Correlation Between American Funds and American Century
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Washington and American Century Etf, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and American Century.
Diversification Opportunities for American Funds and American Century
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Washington and American Century Etf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Etf and American Funds 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 Funds Washington 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 Etf has no effect on the direction of American Funds i.e., American Funds and American Century go up and down completely randomly.
Pair Corralation between American Funds and American Century
Assuming the 90 days horizon American Funds is expected to generate 4.73 times less return on investment than American Century. But when comparing it to its historical volatility, American Funds Washington is 2.39 times less risky than American Century. It trades about 0.12 of its potential returns per unit of risk. American Century Etf is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,758 in American Century Etf on August 30, 2024 and sell it today you would earn a total of 172.00 from holding American Century Etf or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Funds Washington vs. American Century Etf
Performance |
| Timeline |
| American Funds Washington |
| American Century Etf |
American Funds and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and American Century
The main advantage of trading using opposite American Funds and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. International Investors Gold | American Funds vs. Europac Gold Fund | American Funds vs. Global Gold Fund | American Funds vs. Gabelli Gold Fund |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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