Correlation Between American Century and American Century

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

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

Diversification Opportunities for American Century and American Century

0.36

Correlation Coefficient

American Century  American Century

Weak diversification

The 3 months correlation between American and American is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding American Century Quality 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 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 Quality 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 American Century i.e., American Century and American Century go up and down completely randomly.

Pair Corralation between American Century and American Century

Given the investment horizon of 90 days American Century Quality is expected to generate 1.23 times more return on investment than American Century. However, American Century is 1.23 times more volatile than American Century ETF. It trades about 0.34 of its potential returns per unit of risk. American Century ETF is currently generating about 0.02 per unit of risk. If you would invest  4,538  in American Century Quality on August 30, 2024 and sell it today you would earn a total of  187.00  from holding American Century Quality or generate 4.12% return on investment over 90 days.

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

American Century Quality  vs.  American Century ETF

American Century Quality

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Century Quality are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in December 2024.

American Century ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, American Century is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Century and American Century

The main advantage of trading using opposite American Century and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century 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 American Century Quality 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.