Correlation Between American Century and IShares Broad

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

Diversification Opportunities for American Century and IShares Broad

-0.31

Correlation Coefficient

American Century  IShares Broad

Very good diversification

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

Pair Corralation between American Century and IShares Broad

Given the investment horizon of 90 days American Century STOXX is expected to generate 1.85 times more return on investment than IShares Broad. However, American Century is 1.85 times more volatile than iShares Broad USD. It trades about 0.12 of its potential returns per unit of risk. iShares Broad USD is currently generating about -0.09 per unit of risk. If you would invest  6,047  in American Century STOXX on September 15, 2024 and sell it today you would earn a total of  284.00  from holding American Century STOXX or generate 4.7% 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.  iShares Broad USD

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.

iShares Broad USD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Broad USD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, IShares Broad 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 IShares Broad

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

The idea behind American Century STOXX and iShares Broad USD 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 Global Correlations module to find global opportunities by holding instruments from different markets.