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 Diversified 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
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Small is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Century Diversified 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 Diversified 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 is expected to generate 15.62 times less return on investment than Small Cap. But when comparing it to its historical volatility, American Century Diversified is 4.65 times less risky than Small Cap. It trades about 0.07 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,419 in Small Cap Stock on August 29, 2024 and sell it today you would earn a total of 119.00 from holding Small Cap Stock or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Century Diversified vs. Small Cap Stock
Performance |
| Timeline |
| American Century Div |
| 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. Vanguard Total Bond | American Century vs. Vanguard Total Bond | American Century vs. Vanguard Total Bond | American Century vs. Vanguard Total Bond |
| Small Cap vs. Franklin Adjustable Government | Small Cap vs. Dreyfus Government Cash | Small Cap vs. Lord Abbett Government | Small Cap vs. Inverse Government Long |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |