Correlation Between Embrace Change and American Century

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

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

Diversification Opportunities for Embrace Change and American Century

0.04

Correlation Coefficient

Embrace Change  American Century

Significant diversification

The 3 months correlation between Embrace and American is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Embrace Change Acquisition and American Century One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century One and Embrace Change 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 Embrace Change Acquisition are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century One has no effect on the direction of Embrace Change i.e., Embrace Change and American Century go up and down completely randomly.

Pair Corralation between Embrace Change and American Century

Assuming the 90 days horizon Embrace Change Acquisition is expected to generate 23.74 times more return on investment than American Century. However, Embrace Change is 23.74 times more volatile than American Century One. It trades about 0.1 of its potential returns per unit of risk. American Century One is currently generating about -0.09 per unit of risk. If you would invest  12.00  in Embrace Change Acquisition on November 29, 2024 and sell it today you would earn a total of  1.00  from holding Embrace Change Acquisition or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.19%
Values	Daily Returns

Embrace Change Acquisition  vs.  American Century One

Embrace Change Acqui

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Embrace Change reported solid returns over the last few months and may actually be approaching a breakup point.

American Century One

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Century One 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.

Pair Trading with Embrace Change and American Century

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

The idea behind Embrace Change Acquisition and American Century One 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.