Correlation Between American Century and Principal Exchange

Can any of the company-specific risk be diversified away by investing in both American Century and Principal Exchange 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 Principal Exchange 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 Principal Exchange Traded Funds, you can compare the effects of market volatilities on American Century and Principal Exchange 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 Principal Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Principal Exchange.

Diversification Opportunities for American Century and Principal Exchange

-0.24

Correlation Coefficient

American Century  Principal Exchange

Very good diversification

The 3 months correlation between American and Principal is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding American Century STOXX and Principal Exchange Traded Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Exchange 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 Principal Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Exchange has no effect on the direction of American Century i.e., American Century and Principal Exchange go up and down completely randomly.

Pair Corralation between American Century and Principal Exchange

Given the investment horizon of 90 days American Century STOXX is expected to generate 1.62 times more return on investment than Principal Exchange. However, American Century is 1.62 times more volatile than Principal Exchange Traded Funds. It trades about 0.14 of its potential returns per unit of risk. Principal Exchange Traded Funds is currently generating about 0.07 per unit of risk. If you would invest  6,243  in American Century STOXX on September 17, 2024 and sell it today you would earn a total of  88.00  from holding American Century STOXX or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

American Century STOXX  vs.  Principal Exchange Traded Fund

American Century STOXX

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century STOXX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. 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.

Principal Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Exchange Traded Funds has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Principal Exchange is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Century and Principal Exchange

The main advantage of trading using opposite American Century and Principal Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Principal Exchange 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 Principal Exchange will offset losses from the drop in Principal Exchange's long position.

The idea behind American Century STOXX and Principal Exchange Traded Funds 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.