Correlation Between AdvisorShares Dorsey and American Century

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

By analyzing existing cross correlation between AdvisorShares Dorsey Wright and American Century ETF, you can compare the effects of market volatilities on AdvisorShares Dorsey 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 AdvisorShares Dorsey with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvisorShares Dorsey and American Century.

Diversification Opportunities for AdvisorShares Dorsey and American Century

-0.56

Correlation Coefficient

AdvisorShares Dorsey  American Century

Excellent diversification

The 3 months correlation between AdvisorShares and American is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares Dorsey Wright and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF and AdvisorShares Dorsey 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 AdvisorShares Dorsey Wright 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 ETF has no effect on the direction of AdvisorShares Dorsey i.e., AdvisorShares Dorsey and American Century go up and down completely randomly.

Pair Corralation between AdvisorShares Dorsey and American Century

Given the investment horizon of 90 days AdvisorShares Dorsey Wright is expected to generate 1.87 times more return on investment than American Century. However, AdvisorShares Dorsey is 1.87 times more volatile than American Century ETF. It trades about 0.1 of its potential returns per unit of risk. American Century ETF is currently generating about 0.1 per unit of risk. If you would invest  5,323  in AdvisorShares Dorsey Wright on October 21, 2024 and sell it today you would earn a total of  1,903  from holding AdvisorShares Dorsey Wright or generate 35.75% return on investment over 90 days.

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

AdvisorShares Dorsey Wright  vs.  American Century ETF

AdvisorShares Dorsey

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Dorsey Wright are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, AdvisorShares Dorsey may actually be approaching a critical reversion point that can send shares even higher in February 2025.

American Century ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, American Century is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with AdvisorShares Dorsey and American Century

The main advantage of trading using opposite AdvisorShares Dorsey and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvisorShares Dorsey 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 AdvisorShares Dorsey Wright and American Century ETF 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.