Correlation Between American Century and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both American Century and Stone Ridge 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 Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Diversified and Stone Ridge Diversified, you can compare the effects of market volatilities on American Century and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Stone Ridge.
Diversification Opportunities for American Century and Stone Ridge
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Stone is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Century Diversified and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified 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 Diversified are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of American Century i.e., American Century and Stone Ridge go up and down completely randomly.
Pair Corralation between American Century and Stone Ridge
Assuming the 90 days horizon American Century is expected to generate 2.45 times less return on investment than Stone Ridge. In addition to that, American Century is 1.85 times more volatile than Stone Ridge Diversified. It trades about 0.04 of its total potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.17 per unit of volatility. If you would invest 1,058 in Stone Ridge Diversified on October 20, 2024 and sell it today you would earn a total of 6.00 from holding Stone Ridge Diversified or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Diversified vs. Stone Ridge Diversified
Performance |
| Timeline |
| American Century Div |
| Stone Ridge Diversified |
American Century and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Stone Ridge
The main advantage of trading using opposite American Century and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.| American Century vs. Nuveen Strategic Municipal | American Century vs. Dws Government Money | American Century vs. Pioneer Amt Free Municipal | American Century vs. Metropolitan West Porate |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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