Correlation Between American Century and Health Care
Can any of the company-specific risk be diversified away by investing in both American Century and Health Care 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 Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Capital and Health Care Fund, you can compare the effects of market volatilities on American Century and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Health Care.
Diversification Opportunities for American Century and Health Care
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Health is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding American Century Capital and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund 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 Capital are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of American Century i.e., American Century and Health Care go up and down completely randomly.
Pair Corralation between American Century and Health Care
Assuming the 90 days horizon American Century Capital is expected to generate 0.91 times more return on investment than Health Care. However, American Century Capital is 1.1 times less risky than Health Care. It trades about 0.34 of its potential returns per unit of risk. Health Care Fund is currently generating about 0.31 per unit of risk. If you would invest 1,005 in American Century Capital on November 5, 2024 and sell it today you would earn a total of 50.00 from holding American Century Capital or generate 4.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Capital vs. Health Care Fund
Performance |
| Timeline |
| American Century Capital |
| Health Care Fund |
American Century and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Health Care
The main advantage of trading using opposite American Century and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| American Century vs. Vy Columbia Small | American Century vs. Praxis Small Cap | American Century vs. Tax Managed Mid Small | American Century vs. Sp Smallcap 600 |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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