Correlation Between Mid Cap and American Century
Can any of the company-specific risk be diversified away by investing in both Mid Cap and American Century 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 Mid Cap and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value and American Century Focused, you can compare the effects of market volatilities on Mid Cap and American Century 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 Mid Cap with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and American Century.
Diversification Opportunities for Mid Cap and American Century
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mid and American is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and American Century Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Focused and Mid Cap 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 Mid Cap Value are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Focused has no effect on the direction of Mid Cap i.e., Mid Cap and American Century go up and down completely randomly.
Pair Corralation between Mid Cap and American Century
Assuming the 90 days horizon Mid Cap Value is expected to generate 0.92 times more return on investment than American Century. However, Mid Cap Value is 1.09 times less risky than American Century. It trades about 0.28 of its potential returns per unit of risk. American Century Focused is currently generating about 0.1 per unit of risk. If you would invest 1,668 in Mid Cap Value on September 5, 2024 and sell it today you would earn a total of 78.00 from holding Mid Cap Value or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value vs. American Century Focused
Performance |
| Timeline |
| Mid Cap Value |
| American Century Focused |
Mid Cap and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and American Century
The main advantage of trading using opposite Mid Cap and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.| Mid Cap vs. Equity Growth Fund | Mid Cap vs. Income Growth Fund | Mid Cap vs. Diversified Bond Fund | Mid Cap vs. Emerging Markets Fund |
| American Century vs. Value Fund Investor | American Century vs. Ultra Fund Investor | American Century vs. Growth Fund Investor | American Century vs. Income Growth Fund |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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