Correlation Between Amg River and American Century

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

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

Diversification Opportunities for Amg River and American Century

0.62

Correlation Coefficient

Amg River  American Century

Poor diversification

The 3 months correlation between Amg and American is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road 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 Amg River 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 Amg River Road 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 Amg River i.e., Amg River and American Century go up and down completely randomly.

Pair Corralation between Amg River and American Century

Assuming the 90 days horizon Amg River is expected to generate 2.85 times less return on investment than American Century. But when comparing it to its historical volatility, Amg River Road is 1.08 times less risky than American Century. It trades about 0.03 of its potential returns per unit of risk. American Century Ultra is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,388  in American Century Ultra on December 2, 2024 and sell it today you would earn a total of  3,753  from holding American Century Ultra or generate 58.75% return on investment over 90 days.

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

Amg River Road  vs.  American Century Ultra

Amg River Road

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amg River Road has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

American Century Ultra

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Century Ultra has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Amg River and American Century

The main advantage of trading using opposite Amg River and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amg River 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 Amg River Road 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.