Correlation Between IShares Russell and American Century

Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 Russell 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 Russell 2000 and American Century ETF, you can compare the effects of market volatilities on IShares Russell 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 Russell with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and American Century.

Diversification Opportunities for IShares Russell and American Century

1.0

Correlation Coefficient

IShares Russell  American Century

No risk reduction

The 3 months correlation between IShares and American is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 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 Russell 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 Russell 2000 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 Russell i.e., IShares Russell and American Century go up and down completely randomly.

Pair Corralation between IShares Russell and American Century

Considering the 90-day investment horizon IShares Russell is expected to generate 1.07 times less return on investment than American Century. But when comparing it to its historical volatility, iShares Russell 2000 is 1.1 times less risky than American Century. It trades about 0.1 of its potential returns per unit of risk. American Century ETF is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,438  in American Century ETF on August 30, 2024 and sell it today you would earn a total of  459.00  from holding American Century ETF or generate 8.44% return on investment over 90 days.

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

iShares Russell 2000  vs.  American Century ETF

iShares Russell 2000

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 2000 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in December 2024.

American Century ETF

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Russell and American Century

The main advantage of trading using opposite IShares Russell and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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 Russell 2000 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.