Correlation Between Global Tech and American Century

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

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

Diversification Opportunities for Global Tech and American Century

-0.32

Correlation Coefficient

Global Tech  American Century

Very good diversification

The 3 months correlation between Global and American is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Global Tech Industries 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 Global Tech 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 Global Tech Industries 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 Global Tech i.e., Global Tech and American Century go up and down completely randomly.

Pair Corralation between Global Tech and American Century

Given the investment horizon of 90 days Global Tech Industries is expected to generate 275.97 times more return on investment than American Century. However, Global Tech is 275.97 times more volatile than American Century One. It trades about 0.23 of its potential returns per unit of risk. American Century One is currently generating about 0.19 per unit of risk. If you would invest  8.00  in Global Tech Industries on September 12, 2024 and sell it today you would lose (6.44) from holding Global Tech Industries or give up 80.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Global Tech Industries  vs.  American Century One

Global Tech Industries

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Tech Industries are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Global Tech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

American Century One

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century One are ranked lower than 14 (%) 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.

Pair Trading with Global Tech and American Century

The main advantage of trading using opposite Global Tech and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Tech 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 Global Tech Industries 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.

Check out your portfolio center.

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.