Correlation Between American Century and Multi-manager High

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

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

Diversification Opportunities for American Century and Multi-manager High

-0.31

Correlation Coefficient

American Century  Multi-manager High

Very good diversification

The 3 months correlation between American and Multi-manager is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Century Ultra and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High and American Century 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 American Century Ultra are associated (or correlated) with Multi-manager High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of American Century i.e., American Century and Multi-manager High go up and down completely randomly.

Pair Corralation between American Century and Multi-manager High

Assuming the 90 days horizon American Century Ultra is expected to under-perform the Multi-manager High. In addition to that, American Century is 8.95 times more volatile than Multi Manager High Yield. It trades about -0.15 of its total potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.18 per unit of volatility. If you would invest  832.00  in Multi Manager High Yield on December 24, 2024 and sell it today you would earn a total of  14.00  from holding Multi Manager High Yield or generate 1.68% return on investment over 90 days.

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

American Century Ultra  vs.  Multi Manager High Yield

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 weak performance in the last few months, the Fund's basic 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.

Multi Manager High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager High Yield are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi-manager High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Century and Multi-manager High

The main advantage of trading using opposite American Century and Multi-manager High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Multi-manager High 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 Multi-manager High will offset losses from the drop in Multi-manager High's long position.

The idea behind American Century Ultra and Multi Manager High Yield 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.