Correlation Between American Century and Pacer Trendpilot

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

Diversification Opportunities for American Century and Pacer Trendpilot

-0.31

Correlation Coefficient

American Century  Pacer Trendpilot

Very good diversification

The 3 months correlation between American and Pacer is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Century STOXX and Pacer Trendpilot Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot Bond 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 Pacer Trendpilot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Trendpilot Bond has no effect on the direction of American Century i.e., American Century and Pacer Trendpilot go up and down completely randomly.

Pair Corralation between American Century and Pacer Trendpilot

Given the investment horizon of 90 days American Century STOXX is expected to generate 2.55 times more return on investment than Pacer Trendpilot. However, American Century is 2.55 times more volatile than Pacer Trendpilot Bond. It trades about 0.17 of its potential returns per unit of risk. Pacer Trendpilot Bond is currently generating about -0.06 per unit of risk. If you would invest  5,954  in American Century STOXX on September 12, 2024 and sell it today you would earn a total of  414.00  from holding American Century STOXX or generate 6.95% return on investment over 90 days.

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

American Century STOXX  vs.  Pacer Trendpilot Bond

American Century STOXX

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century STOXX are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pacer Trendpilot Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Trendpilot Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Pacer Trendpilot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Century and Pacer Trendpilot

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

The idea behind American Century STOXX and Pacer Trendpilot Bond 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.