Correlation Between IShares IBonds and American Century

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

By analyzing existing cross correlation between iShares iBonds 2025 and American Century ETF, you can compare the effects of market volatilities on IShares IBonds 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 IShares IBonds with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBonds and American Century.

Diversification Opportunities for IShares IBonds and American Century

0.4

Correlation Coefficient

IShares IBonds  American Century

Very weak diversification

The 3 months correlation between IShares and American is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds 2025 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 IShares IBonds 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 iShares iBonds 2025 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 IShares IBonds i.e., IShares IBonds and American Century go up and down completely randomly.

Pair Corralation between IShares IBonds and American Century

Given the investment horizon of 90 days iShares iBonds 2025 is expected to generate 0.39 times more return on investment than American Century. However, iShares iBonds 2025 is 2.6 times less risky than American Century. It trades about 0.28 of its potential returns per unit of risk. American Century ETF is currently generating about 0.05 per unit of risk. If you would invest  2,283  in iShares iBonds 2025 on October 7, 2024 and sell it today you would earn a total of  36.00  from holding iShares iBonds 2025 or generate 1.58% return on investment over 90 days.

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

iShares iBonds 2025  vs.  American Century ETF

iShares iBonds 2025

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds 2025 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, IShares IBonds is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Century ETF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, American Century is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares IBonds and American Century

The main advantage of trading using opposite IShares IBonds and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBonds 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 iShares iBonds 2025 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.