Correlation Between Ethereum and American Century

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

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

Diversification Opportunities for Ethereum and American Century

0.88

Correlation Coefficient

Ethereum  American Century

Very poor diversification

The 3 months correlation between Ethereum and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum 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 Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and American Century go up and down completely randomly.

Pair Corralation between Ethereum and American Century

Assuming the 90 days trading horizon Ethereum is expected to under-perform the American Century. In addition to that, Ethereum is 2.44 times more volatile than American Century ETF. It trades about -0.16 of its total potential returns per unit of risk. American Century ETF is currently generating about -0.02 per unit of volatility. If you would invest  10,678  in American Century ETF on October 11, 2024 and sell it today you would lose (97.00) from holding American Century ETF or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Ethereum  vs.  American Century ETF

Ethereum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Century ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, American Century reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethereum and American Century

The main advantage of trading using opposite Ethereum and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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 Ethereum 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.