Correlation Between American Century and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both American Century and WisdomTree International 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 WisdomTree International 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 WisdomTree International Hedged, you can compare the effects of market volatilities on American Century and WisdomTree International 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 WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and WisdomTree International.

Diversification Opportunities for American Century and WisdomTree International

0.22

Correlation Coefficient

American Century  WisdomTree International

Modest diversification

The 3 months correlation between American and WisdomTree is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Century ETF and WisdomTree International Hedge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International 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 WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of American Century i.e., American Century and WisdomTree International go up and down completely randomly.

Pair Corralation between American Century and WisdomTree International

Considering the 90-day investment horizon American Century ETF is expected to generate 0.88 times more return on investment than WisdomTree International. However, American Century ETF is 1.14 times less risky than WisdomTree International. It trades about -0.07 of its potential returns per unit of risk. WisdomTree International Hedged is currently generating about -0.06 per unit of risk. If you would invest  6,821  in American Century ETF on October 6, 2024 and sell it today you would lose (169.00) from holding American Century ETF or give up 2.48% of portfolio value over 90 days.

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

American Century ETF  vs.  WisdomTree International Hedge

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.

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, WisdomTree International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Century and WisdomTree International

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

The idea behind American Century ETF and WisdomTree International Hedged 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.