Correlation Between American Century and FT Cboe

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

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

Diversification Opportunities for American Century and FT Cboe

0.02

Correlation Coefficient

American Century  FT Cboe

Significant diversification

The 3 months correlation between American and DJUL is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Century ETF and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 ETF are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of American Century i.e., American Century and FT Cboe go up and down completely randomly.

Pair Corralation between American Century and FT Cboe

Considering the 90-day investment horizon American Century ETF is expected to under-perform the FT Cboe. In addition to that, American Century is 1.4 times more volatile than FT Cboe Vest. It trades about -0.21 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about -0.1 per unit of volatility. If you would invest  4,259  in FT Cboe Vest on October 12, 2024 and sell it today you would lose (42.00) from holding FT Cboe Vest or give up 0.99% of portfolio value over 90 days.

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

American Century ETF  vs.  FT Cboe Vest

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.

FT Cboe Vest

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FT Cboe is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with American Century and FT Cboe

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

The idea behind American Century ETF and FT Cboe Vest 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.