Correlation Between American Century and Principal Spectrum

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

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

Diversification Opportunities for American Century and Principal Spectrum

-0.12

Correlation Coefficient

American Century  Principal Spectrum

Good diversification

The 3 months correlation between American and Principal is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Century Quality and Principal Spectrum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Spectrum 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 Quality are associated (or correlated) with Principal Spectrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Spectrum has no effect on the direction of American Century i.e., American Century and Principal Spectrum go up and down completely randomly.

Pair Corralation between American Century and Principal Spectrum

Given the investment horizon of 90 days American Century Quality is expected to under-perform the Principal Spectrum. In addition to that, American Century is 2.55 times more volatile than Principal Spectrum Preferred. It trades about -0.05 of its total potential returns per unit of risk. Principal Spectrum Preferred is currently generating about 0.11 per unit of volatility. If you would invest  1,846  in Principal Spectrum Preferred on December 30, 2024 and sell it today you would earn a total of  27.00  from holding Principal Spectrum Preferred or generate 1.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Century Quality  vs.  Principal Spectrum Preferred

American Century Quality

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Century Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, American Century is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Principal Spectrum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Spectrum Preferred are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Spectrum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Century and Principal Spectrum

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

The idea behind American Century Quality and Principal Spectrum Preferred 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.