Correlation Between American Century and Old Westbury
Can any of the company-specific risk be diversified away by investing in both American Century and Old Westbury 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 Old Westbury 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 Old Westbury All, you can compare the effects of market volatilities on American Century and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Old Westbury.
Diversification Opportunities for American Century and Old Westbury
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Old is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Century High and Old Westbury All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury All 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury All has no effect on the direction of American Century i.e., American Century and Old Westbury go up and down completely randomly.
Pair Corralation between American Century and Old Westbury
Assuming the 90 days horizon American Century is expected to generate 4.54 times less return on investment than Old Westbury. But when comparing it to its historical volatility, American Century High is 4.62 times less risky than Old Westbury. It trades about 0.19 of its potential returns per unit of risk. Old Westbury All is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,673 in Old Westbury All on September 2, 2024 and sell it today you would earn a total of 230.00 from holding Old Westbury All or generate 8.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century High vs. Old Westbury All
Performance |
| Timeline |
| American Century High |
| Old Westbury All |
American Century and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Old Westbury
The main advantage of trading using opposite American Century and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| American Century vs. Tekla Healthcare Opportunities | American Century vs. Invesco Global Health | American Century vs. Health Care Fund | American Century vs. Live Oak Health |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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