Correlation Between American Century and Pacific Funds

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

By analyzing existing cross correlation between American Century High and Pacific Funds Short, you can compare the effects of market volatilities on American Century and Pacific Funds 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 Pacific Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Pacific Funds.

Diversification Opportunities for American Century and Pacific Funds

0.17

Correlation Coefficient

American Century  Pacific Funds

Average diversification

The 3 months correlation between American and Pacific is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding American Century High and Pacific Funds Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Short 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 High are associated (or correlated) with Pacific Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Funds Short has no effect on the direction of American Century i.e., American Century and Pacific Funds go up and down completely randomly.

Pair Corralation between American Century and Pacific Funds

Assuming the 90 days horizon American Century High is expected to generate 1.57 times more return on investment than Pacific Funds. However, American Century is 1.57 times more volatile than Pacific Funds Short. It trades about 0.17 of its potential returns per unit of risk. Pacific Funds Short is currently generating about 0.02 per unit of risk. If you would invest  860.00  in American Century High on September 4, 2024 and sell it today you would earn a total of  14.00  from holding American Century High or generate 1.63% return on investment over 90 days.

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

American Century High  vs.  Pacific Funds Short

American Century High

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century High are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pacific Funds Short

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Funds Short are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pacific Funds 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 Pacific Funds

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

The idea behind American Century High and Pacific Funds Short 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.