Correlation Between Focused International and American Century

Can any of the company-specific risk be diversified away by investing in both Focused International 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 Focused International and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Focused International Growth and American Century Non Us, you can compare the effects of market volatilities on Focused International 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 Focused International with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focused International and American Century.

Diversification Opportunities for Focused International and American Century

0.6

Correlation Coefficient

Focused International  American Century

Poor diversification

The 3 months correlation between Focused and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Focused International Growth and American Century Non Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Non and Focused International 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 Focused International Growth 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 Non has no effect on the direction of Focused International i.e., Focused International and American Century go up and down completely randomly.

Pair Corralation between Focused International and American Century

Assuming the 90 days horizon Focused International is expected to generate 6.36 times less return on investment than American Century. In addition to that, Focused International is 1.08 times more volatile than American Century Non Us. It trades about 0.03 of its total potential returns per unit of risk. American Century Non Us is currently generating about 0.23 per unit of volatility. If you would invest  799.00  in American Century Non Us on December 22, 2024 and sell it today you would earn a total of  117.00  from holding American Century Non Us or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Focused International Growth  vs.  American Century Non Us

Focused International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Focused International Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Focused International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Century Non

Risk-Adjusted Performance

Solid

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

Pair Trading with Focused International and American Century

The main advantage of trading using opposite Focused International and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focused International 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 Focused International Growth and American Century Non Us 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.