Correlation Between American Century and Versus Capital

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

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

Diversification Opportunities for American Century and Versus Capital

0.89

Correlation Coefficient

American Century  Versus Capital

Very poor diversification

The 3 months correlation between American and Versus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Century Global and Versus Capital Multi Manager in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Versus Capital Multi 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 Global are associated (or correlated) with Versus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Versus Capital Multi has no effect on the direction of American Century i.e., American Century and Versus Capital go up and down completely randomly.

Pair Corralation between American Century and Versus Capital

Assuming the 90 days horizon American Century Global is expected to under-perform the Versus Capital. In addition to that, American Century is 5.46 times more volatile than Versus Capital Multi Manager. It trades about -0.08 of its total potential returns per unit of risk. Versus Capital Multi Manager is currently generating about -0.04 per unit of volatility. If you would invest  2,465  in Versus Capital Multi Manager on November 28, 2024 and sell it today you would lose (10.00) from holding Versus Capital Multi Manager or give up 0.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

American Century Global  vs.  Versus Capital Multi Manager

American Century Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Century Global has generated negative risk-adjusted returns adding no value to fund investors. 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.

Versus Capital Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Versus Capital Multi Manager has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Versus Capital 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 Versus Capital

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

The idea behind American Century Global and Versus Capital Multi Manager 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.