Correlation Between American Century and Nicholas
Can any of the company-specific risk be diversified away by investing in both American Century and Nicholas 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 Nicholas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Mid and Nicholas Ltd Edition, you can compare the effects of market volatilities on American Century and Nicholas 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 Nicholas. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Nicholas.
Diversification Opportunities for American Century and Nicholas
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Nicholas is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Century Mid and Nicholas Ltd Edition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Edition 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 Mid are associated (or correlated) with Nicholas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Edition has no effect on the direction of American Century i.e., American Century and Nicholas go up and down completely randomly.
Pair Corralation between American Century and Nicholas
Assuming the 90 days horizon American Century is expected to generate 1.38 times less return on investment than Nicholas. But when comparing it to its historical volatility, American Century Mid is 1.54 times less risky than Nicholas. It trades about 0.14 of its potential returns per unit of risk. Nicholas Ltd Edition is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,490 in Nicholas Ltd Edition on September 1, 2024 and sell it today you would earn a total of 453.00 from holding Nicholas Ltd Edition or generate 18.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
American Century Mid vs. Nicholas Ltd Edition
Performance |
| Timeline |
| American Century Mid |
| Nicholas Edition |
American Century and Nicholas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Nicholas
The main advantage of trading using opposite American Century and Nicholas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Nicholas 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 Nicholas will offset losses from the drop in Nicholas' long position.| American Century vs. Metropolitan West High | American Century vs. Siit High Yield | American Century vs. Ab High Income | American Century vs. Alliancebernstein Global High |
| Nicholas vs. Nicholas Equity Income | Nicholas vs. Nicholas Ltd Edition | Nicholas vs. Nicholas Ii Inc | Nicholas vs. Nicholas Fund Inc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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