Correlation Between Stone Ridge and American Century
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and American Century Mid, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and American Century.
Diversification Opportunities for Stone Ridge and American Century
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stone and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and American Century Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Mid and Stone Ridge 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 Stone Ridge Diversified 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 Mid has no effect on the direction of Stone Ridge i.e., Stone Ridge and American Century go up and down completely randomly.
Pair Corralation between Stone Ridge and American Century
Assuming the 90 days horizon Stone Ridge is expected to generate 1.74 times less return on investment than American Century. But when comparing it to its historical volatility, Stone Ridge Diversified is 3.43 times less risky than American Century. It trades about 0.17 of its potential returns per unit of risk. American Century Mid is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,434 in American Century Mid on September 12, 2024 and sell it today you would earn a total of 312.00 from holding American Century Mid or generate 21.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge Diversified vs. American Century Mid
Performance |
| Timeline |
| Stone Ridge Diversified |
| American Century Mid |
Stone Ridge and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and American Century
The main advantage of trading using opposite Stone Ridge and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Blackrock Alternative Capital | Stone Ridge vs. Aqr Style Premia | Stone Ridge vs. Goldman Sachs Absolute | Stone Ridge vs. Aquagold International |
| American Century vs. Fidelity Advisor Diversified | American Century vs. Aqr Diversified Arbitrage | American Century vs. Stone Ridge Diversified | American Century vs. Delaware Limited Term Diversified |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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