Correlation Between American Century and TOMI Environmental

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

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

Diversification Opportunities for American Century and TOMI Environmental

-0.13

Correlation Coefficient

American Century  TOMI Environmental

Good diversification

The 3 months correlation between American and TOMI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding American Century One and TOMI Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOMI Environmental 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 One are associated (or correlated) with TOMI Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOMI Environmental has no effect on the direction of American Century i.e., American Century and TOMI Environmental go up and down completely randomly.

Pair Corralation between American Century and TOMI Environmental

Assuming the 90 days horizon American Century is expected to generate 3.03 times less return on investment than TOMI Environmental. But when comparing it to its historical volatility, American Century One is 7.89 times less risky than TOMI Environmental. It trades about 0.09 of its potential returns per unit of risk. TOMI Environmental Solutions is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  57.00  in TOMI Environmental Solutions on September 4, 2024 and sell it today you would earn a total of  14.00  from holding TOMI Environmental Solutions or generate 24.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Century One  vs.  TOMI Environmental Solutions

American Century One

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century One are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TOMI Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOMI Environmental Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with American Century and TOMI Environmental

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

The idea behind American Century One and TOMI Environmental Solutions 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.