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 STOXX 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

0.5

Correlation Coefficient

American Century  American Century

Very weak diversification

The 3 months correlation between American and American is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Century STOXX 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 STOXX 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 is expected to generate 2.7 times less return on investment than American Century. But when comparing it to its historical volatility, American Century STOXX is 1.88 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 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,140  in American Century ETF on October 9, 2024 and sell it today you would earn a total of  3,650  from holding American Century ETF or generate 51.12% return on investment over 90 days.

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

American Century STOXX  vs.  American Century ETF

American Century STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, American Century is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

American Century ETF

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 14 (%) 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.

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 STOXX 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.