Correlation Between Invesco NASDAQ and American Century

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Can any of the company-specific risk be diversified away by investing in both Invesco NASDAQ 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 Invesco NASDAQ and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco NASDAQ 100 and American Century ETF, you can compare the effects of market volatilities on Invesco NASDAQ 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 Invesco NASDAQ with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and American Century.

Diversification Opportunities for Invesco NASDAQ and American Century

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Invesco and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ 100 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 Invesco NASDAQ 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 Invesco NASDAQ 100 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 Invesco NASDAQ i.e., Invesco NASDAQ and American Century go up and down completely randomly.

Pair Corralation between Invesco NASDAQ and American Century

Given the investment horizon of 90 days Invesco NASDAQ is expected to generate 3.49 times less return on investment than American Century. But when comparing it to its historical volatility, Invesco NASDAQ 100 is 1.33 times less risky than American Century. It trades about 0.02 of its potential returns per unit of risk. American Century ETF is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,835  in American Century ETF on October 26, 2024 and sell it today you would earn a total of  161.00  from holding American Century ETF or generate 1.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Invesco NASDAQ 100  vs.  American Century ETF

 Performance 
       Timeline  
Invesco NASDAQ 100 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco NASDAQ 100 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish basic indicators, Invesco NASDAQ may actually be approaching a critical reversion point that can send shares even higher in February 2025.
American Century ETF 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, American Century reported solid returns over the last few months and may actually be approaching a breakup point.

Invesco NASDAQ and American Century Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco NASDAQ and American Century

The main advantage of trading using opposite Invesco NASDAQ and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco NASDAQ 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 Invesco NASDAQ 100 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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