Correlation Between American Century and Dillards

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

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

Diversification Opportunities for American Century and Dillards

0.21

Correlation Coefficient

American Century  Dillards

Modest diversification

The 3 months correlation between American and Dillards is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Century One and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards 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 One are associated (or correlated) with Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of American Century i.e., American Century and Dillards go up and down completely randomly.

Pair Corralation between American Century and Dillards

Assuming the 90 days horizon American Century is expected to generate 12.64 times less return on investment than Dillards. But when comparing it to its historical volatility, American Century One is 3.53 times less risky than Dillards. It trades about 0.05 of its potential returns per unit of risk. Dillards is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  35,563  in Dillards on October 23, 2024 and sell it today you would earn a total of  11,135  from holding Dillards or generate 31.31% return on investment over 90 days.

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

American Century One  vs.  Dillards

American Century One

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Century One are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dillards

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Century and Dillards

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

The idea behind American Century One and Dillards 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.