Correlation Between American Century and Select Fund

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Can any of the company-specific risk be diversified away by investing in both American Century and Select Fund 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 Select Fund 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 Select Fund Investor, you can compare the effects of market volatilities on American Century and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Select Fund.

Diversification Opportunities for American Century and Select Fund

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between American and Select is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Century Ultra and Select Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund Investor 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 Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund Investor has no effect on the direction of American Century i.e., American Century and Select Fund go up and down completely randomly.

Pair Corralation between American Century and Select Fund

Assuming the 90 days horizon American Century Ultra is expected to generate 1.05 times more return on investment than Select Fund. However, American Century is 1.05 times more volatile than Select Fund Investor. It trades about 0.28 of its potential returns per unit of risk. Select Fund Investor is currently generating about 0.23 per unit of risk. If you would invest  9,347  in American Century Ultra on September 6, 2024 and sell it today you would earn a total of  1,740  from holding American Century Ultra or generate 18.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.44%
ValuesDaily Returns

American Century Ultra  vs.  Select Fund Investor

 Performance 
       Timeline  
American Century Ultra 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Century Ultra are ranked lower than 22 (%) 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.
Select Fund Investor 

Risk-Adjusted Performance

18 of 100

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

American Century and Select Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Century and Select Fund

The main advantage of trading using opposite American Century and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.
The idea behind American Century Ultra and Select Fund Investor 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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