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 2065 and American Century One, 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
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and American is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2065 and American Century One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century One 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 2065 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 One 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 1.43 times less return on investment than American Century. In addition to that, American Funds is 1.04 times more volatile than American Century One. It trades about 0.24 of its total potential returns per unit of risk. American Century One is currently generating about 0.35 per unit of volatility. If you would invest 1,123 in American Century One on September 2, 2024 and sell it today you would earn a total of 49.00 from holding American Century One or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2065 vs. American Century One
Performance |
| Timeline |
| American Funds 2065 |
| American Century One |
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. Legg Mason Partners | American Funds vs. Prudential Government Money | American Funds vs. Transamerica Funds | American Funds vs. Meeder Funds |
| American Century vs. Harbor Vertible Securities | American Century vs. Columbia Vertible Securities | American Century vs. Putnam Convertible Incm Gwth | American Century vs. Virtus Convertible |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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