Correlation Between Balanced Fund and American Century
Can any of the company-specific risk be diversified away by investing in both Balanced Fund 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 Balanced Fund and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and American Century One, you can compare the effects of market volatilities on Balanced Fund 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 Balanced Fund with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and American Century.
Diversification Opportunities for Balanced Fund and American Century
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor 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 Balanced Fund 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 Balanced Fund Investor 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 Balanced Fund i.e., Balanced Fund and American Century go up and down completely randomly.
Pair Corralation between Balanced Fund and American Century
Assuming the 90 days horizon Balanced Fund Investor is expected to generate 1.59 times more return on investment than American Century. However, Balanced Fund is 1.59 times more volatile than American Century One. It trades about 0.38 of its potential returns per unit of risk. American Century One is currently generating about 0.42 per unit of risk. If you would invest 1,956 in Balanced Fund Investor on September 2, 2024 and sell it today you would earn a total of 72.00 from holding Balanced Fund Investor or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Investor vs. American Century One
Performance |
| Timeline |
| Balanced Fund Investor |
| American Century One |
Balanced Fund and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and American Century
The main advantage of trading using opposite Balanced Fund and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund 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.| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
| American Century vs. Mid Cap Value | American Century vs. Equity Growth Fund | American Century vs. Income Growth Fund | American Century 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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