Correlation Between American Century and Ultra Fund

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

Diversification Opportunities for American Century and Ultra Fund

0.96

Correlation Coefficient

American Century  Ultra Fund

Almost no diversification

The 3 months correlation between American and Ultra is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Century Ultra and Ultra Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra 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 Ultra Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Fund Investor has no effect on the direction of American Century i.e., American Century and Ultra Fund go up and down completely randomly.

Pair Corralation between American Century and Ultra Fund

Assuming the 90 days horizon American Century Ultra is expected to generate 1.01 times more return on investment than Ultra Fund. However, American Century is 1.01 times more volatile than Ultra Fund Investor. It trades about 0.28 of its potential returns per unit of risk. Ultra Fund Investor is currently generating about 0.26 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 Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

American Century Ultra  vs.  Ultra Fund Investor

American Century Ultra

Risk-Adjusted Performance

22 of 100

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.

Ultra Fund Investor

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund Investor are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultra Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Century and Ultra Fund

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

The idea behind American Century Ultra and Ultra 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.

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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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..