Correlation Between American Century and Growth Fund

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

Diversification Opportunities for American Century and Growth Fund

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between American and Growth is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American Century Ultra and Growth Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund C 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund C has no effect on the direction of American Century i.e., American Century and Growth Fund go up and down completely randomly.

Pair Corralation between American Century and Growth Fund

Assuming the 90 days horizon American Century Ultra is expected to generate 1.03 times more return on investment than Growth Fund. However, American Century is 1.03 times more volatile than Growth Fund C. It trades about 0.1 of its potential returns per unit of risk. Growth Fund C is currently generating about 0.09 per unit of risk. If you would invest  8,401  in American Century Ultra on September 5, 2024 and sell it today you would earn a total of  2,686  from holding American Century Ultra or generate 31.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

American Century Ultra  vs.  Growth Fund C

 Performance 
       Timeline  
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.
Growth Fund C 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund C are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Growth Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Century and Growth Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Century and Growth Fund

The main advantage of trading using opposite American Century and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Growth 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 Growth Fund will offset losses from the drop in Growth Fund's long position.
The idea behind American Century Ultra and Growth Fund C 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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