Correlation Between Lumia and American Century
Can any of the company-specific risk be diversified away by investing in both Lumia 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 Lumia and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumia and American Century Quality, you can compare the effects of market volatilities on Lumia 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 Lumia with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumia and American Century.
Diversification Opportunities for Lumia and American Century
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lumia and American is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and American Century Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Quality and Lumia 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 Lumia 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 Quality has no effect on the direction of Lumia i.e., Lumia and American Century go up and down completely randomly.
Pair Corralation between Lumia and American Century
Assuming the 90 days trading horizon Lumia is expected to under-perform the American Century. In addition to that, Lumia is 17.07 times more volatile than American Century Quality. It trades about -0.07 of its total potential returns per unit of risk. American Century Quality is currently generating about 0.08 per unit of volatility. If you would invest 4,589 in American Century Quality on October 21, 2024 and sell it today you would earn a total of 27.00 from holding American Century Quality or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Lumia vs. American Century Quality
Performance |
| Timeline |
| Lumia |
| American Century Quality |
Lumia and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumia and American Century
The main advantage of trading using opposite Lumia and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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.The idea behind Lumia and American Century Quality pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| American Century vs. American Century ETF | American Century vs. American Century Quality | American Century vs. Rareview Dynamic Fixed | American Century vs. First Trust Exchange |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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