Correlation Between American Century and CARPENTER

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

Diversification Opportunities for American Century and CARPENTER

-0.1

Correlation Coefficient

American Century  CARPENTER

Good diversification

The 3 months correlation between American and CARPENTER is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding American Century One and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY 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 CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of American Century i.e., American Century and CARPENTER go up and down completely randomly.

Pair Corralation between American Century and CARPENTER

Assuming the 90 days horizon American Century One is expected to generate 1.19 times more return on investment than CARPENTER. However, American Century is 1.19 times more volatile than CARPENTER TECHNOLOGY P. It trades about 0.18 of its potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about 0.0 per unit of risk. If you would invest  1,097  in American Century One on September 2, 2024 and sell it today you would earn a total of  75.00  from holding American Century One or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

American Century One  vs.  CARPENTER TECHNOLOGY P

American Century One

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century One are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER 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 CARPENTER

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

The idea behind American Century One and CARPENTER TECHNOLOGY P 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.