Correlation Between American Century and Tax Exempt
Can any of the company-specific risk be diversified away by investing in both American Century and Tax Exempt 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 Tax Exempt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century High and Tax Exempt Bond, you can compare the effects of market volatilities on American Century and Tax Exempt 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 Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Tax Exempt.
Diversification Opportunities for American Century and Tax Exempt
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Tax is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Century High and Tax Exempt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond 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 High are associated (or correlated) with Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of American Century i.e., American Century and Tax Exempt go up and down completely randomly.
Pair Corralation between American Century and Tax Exempt
Assuming the 90 days horizon American Century High is expected to generate 1.37 times more return on investment than Tax Exempt. However, American Century is 1.37 times more volatile than Tax Exempt Bond. It trades about 0.14 of its potential returns per unit of risk. Tax Exempt Bond is currently generating about 0.09 per unit of risk. If you would invest 707.00 in American Century High on September 12, 2024 and sell it today you would earn a total of 169.00 from holding American Century High or generate 23.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century High vs. Tax Exempt Bond
Performance |
| Timeline |
| American Century High |
| Tax Exempt Bond |
American Century and Tax Exempt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Tax Exempt
The main advantage of trading using opposite American Century and Tax Exempt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Tax Exempt 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 Tax Exempt will offset losses from the drop in Tax Exempt's long position.| American Century vs. Smallcap Growth Fund | American Century vs. Df Dent Small | American Century vs. Touchstone Small Cap | American Century vs. Aqr Small Cap |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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