Correlation Between Small Cap and American Century
Can any of the company-specific risk be diversified away by investing in both Small 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 Small 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 Small Cap Growth and American Century Small, you can compare the effects of market volatilities on Small 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 Small Cap with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and American Century.
Diversification Opportunities for Small Cap and American Century
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Small and American is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and American Century Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Small and Small 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 Small Cap Growth 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 Small has no effect on the direction of Small Cap i.e., Small Cap and American Century go up and down completely randomly.
Pair Corralation between Small Cap and American Century
Assuming the 90 days horizon Small Cap is expected to generate 1.06 times less return on investment than American Century. But when comparing it to its historical volatility, Small Cap Growth is 1.0 times less risky than American Century. It trades about 0.05 of its potential returns per unit of risk. American Century Small is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,870 in American Century Small on November 28, 2024 and sell it today you would earn a total of 519.00 from holding American Century Small or generate 27.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. American Century Small
Performance |
| Timeline |
| Small Cap Growth |
| American Century Small |
Small Cap and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and American Century
The main advantage of trading using opposite Small Cap and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small 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.| Small Cap vs. Aig Government Money | Small Cap vs. Jpmorgan Trust I | Small Cap vs. Schwab Government Money | Small Cap vs. Doubleline Emerging Markets |
| American Century vs. Wilmington Diversified Income | American Century vs. Aqr Diversified Arbitrage | American Century vs. Blackrock Diversified Fixed | American Century vs. Madison Diversified Income |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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