Correlation Between American Century and Sprott Focus
Can any of the company-specific risk be diversified away by investing in both American Century and Sprott Focus 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 Sprott Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Quality and Sprott Focus Trust, you can compare the effects of market volatilities on American Century and Sprott Focus 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 Sprott Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Sprott Focus.
Diversification Opportunities for American Century and Sprott Focus
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Sprott is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Century Quality and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust 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 Quality are associated (or correlated) with Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of American Century i.e., American Century and Sprott Focus go up and down completely randomly.
Pair Corralation between American Century and Sprott Focus
Given the investment horizon of 90 days American Century Quality is expected to generate 1.21 times more return on investment than Sprott Focus. However, American Century is 1.21 times more volatile than Sprott Focus Trust. It trades about 0.37 of its potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.17 per unit of risk. If you would invest 9,321 in American Century Quality on August 30, 2024 and sell it today you would earn a total of 964.00 from holding American Century Quality or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Quality vs. Sprott Focus Trust
Performance |
| Timeline |
| American Century Quality |
| Sprott Focus Trust |
American Century and Sprott Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Sprott Focus
The main advantage of trading using opposite American Century and Sprott Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Sprott Focus 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 Sprott Focus will offset losses from the drop in Sprott Focus' long position.| American Century vs. American Century STOXX | American Century vs. American Century Quality | American Century vs. Nuveen ESG Large Cap | American Century vs. Invesco SP 500 |
| Sprott Focus vs. MFS Investment Grade | Sprott Focus vs. Invesco High Income | Sprott Focus vs. Eaton Vance National | Sprott Focus vs. Nuveen California Select |
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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