Correlation Between American Century and Real Estate

Can any of the company-specific risk be diversified away by investing in both American Century and Real Estate 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 Real Estate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Century High and Real Estate Securities, you can compare the effects of market volatilities on American Century and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Real Estate.

Diversification Opportunities for American Century and Real Estate

0.38

Correlation Coefficient

American Century  Real Estate

Weak diversification

The 3 months correlation between American and Real is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Century High and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 High are associated (or correlated) with Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of American Century i.e., American Century and Real Estate go up and down completely randomly.

Pair Corralation between American Century and Real Estate

Assuming the 90 days horizon American Century High is expected to generate 0.22 times more return on investment than Real Estate. However, American Century High is 4.52 times less risky than Real Estate. It trades about 0.28 of its potential returns per unit of risk. Real Estate Securities is currently generating about -0.03 per unit of risk. If you would invest  844.00  in American Century High on May 6, 2025 and sell it today you would earn a total of  28.00  from holding American Century High or generate 3.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Century High  vs.  Real Estate Securities

American Century High

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Century High are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Real Estate Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Century and Real Estate

The main advantage of trading using opposite American Century and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.

The idea behind American Century High and Real Estate Securities 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.

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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.