Correlation Between Dimensional ETF and American Century

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

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

Diversification Opportunities for Dimensional ETF and American Century

0.28

Correlation Coefficient

Dimensional ETF  American Century

Modest diversification

The 3 months correlation between Dimensional and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust 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 Dimensional ETF 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 Dimensional ETF Trust 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 Dimensional ETF i.e., Dimensional ETF and American Century go up and down completely randomly.

Pair Corralation between Dimensional ETF and American Century

Given the investment horizon of 90 days Dimensional ETF is expected to generate 3.08 times less return on investment than American Century. In addition to that, Dimensional ETF is 1.16 times more volatile than American Century ETF. It trades about 0.02 of its total potential returns per unit of risk. American Century ETF is currently generating about 0.08 per unit of volatility. If you would invest  3,983  in American Century ETF on October 4, 2024 and sell it today you would earn a total of  566.50  from holding American Century ETF or generate 14.22% return on investment over 90 days.

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

Dimensional ETF Trust  vs.  American Century ETF

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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. Despite somewhat strong basic indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dimensional ETF and American Century

The main advantage of trading using opposite Dimensional ETF and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF 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 Dimensional ETF Trust 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.