Correlation Between American Century and First Trust
Can any of the company-specific risk be diversified away by investing in both American Century and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century ETF and First Trust Senior, you can compare the effects of market volatilities on American Century and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and First Trust.
Diversification Opportunities for American Century and First Trust
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and First is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Century ETF and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 ETF are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of American Century i.e., American Century and First Trust go up and down completely randomly.
Pair Corralation between American Century and First Trust
Given the investment horizon of 90 days American Century is expected to generate 1.03 times less return on investment than First Trust. In addition to that, American Century is 2.19 times more volatile than First Trust Senior. It trades about 0.09 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.21 per unit of volatility. If you would invest 3,934 in First Trust Senior on August 28, 2024 and sell it today you would earn a total of 695.00 from holding First Trust Senior or generate 17.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century ETF vs. First Trust Senior
Performance |
| Timeline |
| American Century ETF |
| First Trust Senior |
American Century and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and First Trust
The main advantage of trading using opposite American Century and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| American Century vs. First Trust Senior | American Century vs. First Trust Low | American Century vs. First Trust Enhanced | American Century vs. First Trust TCW |
| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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