Correlation Between American Century and Small Cap
Can any of the company-specific risk be diversified away by investing in both American Century and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century One and Small Cap Stock, you can compare the effects of market volatilities on American Century and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Small Cap.
Diversification Opportunities for American Century and Small Cap
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Small is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Century One and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock 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 One are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of American Century i.e., American Century and Small Cap go up and down completely randomly.
Pair Corralation between American Century and Small Cap
Assuming the 90 days horizon American Century One is expected to generate 0.27 times more return on investment than Small Cap. However, American Century One is 3.76 times less risky than Small Cap. It trades about 0.23 of its potential returns per unit of risk. Small Cap Stock is currently generating about -0.04 per unit of risk. If you would invest 1,024 in American Century One on September 13, 2024 and sell it today you would earn a total of 13.00 from holding American Century One or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Century One vs. Small Cap Stock
Performance |
| Timeline |
| American Century One |
| Small Cap Stock |
American Century and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Small Cap
The main advantage of trading using opposite American Century and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| American Century vs. Mid Cap Value | American Century vs. Equity Growth Fund | American Century vs. Income Growth Fund | American Century vs. Diversified Bond Fund |
| Small Cap vs. Goldman Sachs Real | Small Cap vs. Fidelity Real Estate | Small Cap vs. Redwood Real Estate | Small Cap vs. Vy Clarion Real |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |