Correlation Between International Growth and American Century
Can any of the company-specific risk be diversified away by investing in both International Growth 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 International Growth and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Growth Fund and American Century Diversified, you can compare the effects of market volatilities on International Growth 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 International Growth with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and American Century.
Diversification Opportunities for International Growth and American Century
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund and American Century Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Div and International Growth 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 International Growth Fund 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 Div has no effect on the direction of International Growth i.e., International Growth and American Century go up and down completely randomly.
Pair Corralation between International Growth and American Century
Assuming the 90 days horizon International Growth Fund is expected to under-perform the American Century. In addition to that, International Growth is 2.13 times more volatile than American Century Diversified. It trades about -0.14 of its total potential returns per unit of risk. American Century Diversified is currently generating about 0.08 per unit of volatility. If you would invest 915.00 in American Century Diversified on August 30, 2024 and sell it today you would earn a total of 6.00 from holding American Century Diversified or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Growth Fund vs. American Century Diversified
Performance |
| Timeline |
| International Growth |
| American Century Div |
International Growth and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and American Century
The main advantage of trading using opposite International Growth and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Growth 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.| International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund | International Growth vs. Europacific Growth Fund |
| American Century vs. Vanguard Total Bond | American Century vs. Vanguard Total Bond | American Century vs. Vanguard Total Bond | American Century vs. Bond Fund Of |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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