Correlation Between First Trust and American Century

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

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

Diversification Opportunities for First Trust and American Century

0.86

Correlation Coefficient

First Trust  American Century

Very poor diversification

The 3 months correlation between First and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset 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 First Trust 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 First Trust Multi Asset 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 First Trust i.e., First Trust and American Century go up and down completely randomly.

Pair Corralation between First Trust and American Century

Given the investment horizon of 90 days First Trust is expected to generate 8.42 times less return on investment than American Century. But when comparing it to its historical volatility, First Trust Multi Asset is 1.79 times less risky than American Century. It trades about 0.03 of its potential returns per unit of risk. American Century ETF is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,085  in American Century ETF on September 14, 2024 and sell it today you would earn a total of  335.00  from holding American Century ETF or generate 5.51% return on investment over 90 days.

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

First Trust Multi Asset  vs.  American Century ETF

First Trust Multi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Asset are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

American Century ETF

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, American Century is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Trust and American Century

The main advantage of trading using opposite First Trust and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Multi Asset 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.