Correlation Between Large Cap and American Century

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

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

Diversification Opportunities for Large Cap and American Century

0.83

Correlation Coefficient

Large Cap  American Century

Very poor diversification

The 3 months correlation between Large and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Value and American Century Etf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Etf and Large Cap 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 Large Cap Value 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 Etf has no effect on the direction of Large Cap i.e., Large Cap and American Century go up and down completely randomly.

Pair Corralation between Large Cap and American Century

Assuming the 90 days horizon Large Cap Value is expected to generate 0.86 times more return on investment than American Century. However, Large Cap Value is 1.16 times less risky than American Century. It trades about -0.02 of its potential returns per unit of risk. American Century Etf is currently generating about -0.12 per unit of risk. If you would invest  2,348  in Large Cap Value on December 29, 2024 and sell it today you would lose (38.00) from holding Large Cap Value or give up 1.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Large Cap Value  vs.  American Century Etf

Large Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Century Etf

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Century Etf has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Large Cap and American Century

The main advantage of trading using opposite Large Cap and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Value and American Century Etf 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.