Correlation Between American Century and Stralem Equity
Can any of the company-specific risk be diversified away by investing in both American Century and Stralem Equity 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 Stralem Equity 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 Stralem Equity Fund, you can compare the effects of market volatilities on American Century and Stralem Equity 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 Stralem Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Stralem Equity.
Diversification Opportunities for American Century and Stralem Equity
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Stralem is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Century High and Stralem Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stralem Equity 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 Stralem Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stralem Equity has no effect on the direction of American Century i.e., American Century and Stralem Equity go up and down completely randomly.
Pair Corralation between American Century and Stralem Equity
Assuming the 90 days horizon American Century is expected to generate 1.84 times less return on investment than Stralem Equity. But when comparing it to its historical volatility, American Century High is 2.58 times less risky than Stralem Equity. It trades about 0.13 of its potential returns per unit of risk. Stralem Equity Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,279 in Stralem Equity Fund on September 3, 2024 and sell it today you would earn a total of 962.00 from holding Stralem Equity Fund or generate 42.21% 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. Stralem Equity Fund
Performance |
| Timeline |
| American Century High |
| Stralem Equity |
American Century and Stralem Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Stralem Equity
The main advantage of trading using opposite American Century and Stralem Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Stralem Equity 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 Stralem Equity will offset losses from the drop in Stralem Equity's long position.| American Century vs. Transamerica Emerging Markets | American Century vs. T Rowe Price | American Century vs. Growth Strategy Fund | American Century vs. Ep Emerging Markets |
| Stralem Equity vs. Templeton Developing Markets | Stralem Equity vs. Kinetics Market Opportunities | Stralem Equity vs. Massmutual Select Diversified | Stralem Equity vs. Morgan Stanley Emerging |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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