Correlation Between Core Plus and American Century

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Can any of the company-specific risk be diversified away by investing in both Core Plus 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 Core Plus and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Core Plus Fund and American Century Ultra, you can compare the effects of market volatilities on Core Plus 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 Core Plus with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Plus and American Century.

Diversification Opportunities for Core Plus and American Century

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Core and American is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Core Plus Fund and American Century Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Ultra and Core Plus 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 Core Plus 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 Ultra has no effect on the direction of Core Plus i.e., Core Plus and American Century go up and down completely randomly.

Pair Corralation between Core Plus and American Century

Assuming the 90 days horizon Core Plus Fund is expected to under-perform the American Century. But the mutual fund apears to be less risky and, when comparing its historical volatility, Core Plus Fund is 3.08 times less risky than American Century. The mutual fund trades about -0.02 of its potential returns per unit of risk. The American Century Ultra is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,042  in American Century Ultra on September 5, 2024 and sell it today you would earn a total of  1,045  from holding American Century Ultra or generate 10.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Core Plus Fund  vs.  American Century Ultra

 Performance 
       Timeline  
Core Plus Fund 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Core Plus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Core Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
American Century Ultra 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Century Ultra are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Century showed solid returns over the last few months and may actually be approaching a breakup point.

Core Plus and American Century Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Core Plus and American Century

The main advantage of trading using opposite Core Plus and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Plus 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.
The idea behind Core Plus Fund and American Century Ultra pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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