Correlation Between American Century and Dimensional ETF
Can any of the company-specific risk be diversified away by investing in both American Century and Dimensional ETF 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 Dimensional ETF 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 Dimensional ETF Trust, you can compare the effects of market volatilities on American Century and Dimensional ETF 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 Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Dimensional ETF.
Diversification Opportunities for American Century and Dimensional ETF
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Dimensional is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Century ETF and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of American Century i.e., American Century and Dimensional ETF go up and down completely randomly.
Pair Corralation between American Century and Dimensional ETF
Given the investment horizon of 90 days American Century is expected to generate 1.15 times less return on investment than Dimensional ETF. In addition to that, American Century is 1.03 times more volatile than Dimensional ETF Trust. It trades about 0.05 of its total potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.06 per unit of volatility. If you would invest 2,090 in Dimensional ETF Trust on August 30, 2024 and sell it today you would earn a total of 610.00 from holding Dimensional ETF Trust or generate 29.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 53.54% |
| Values | Daily Returns |
American Century ETF vs. Dimensional ETF Trust
Performance |
| Timeline |
| American Century ETF |
| Dimensional ETF Trust |
American Century and Dimensional ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Dimensional ETF
The main advantage of trading using opposite American Century and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.| American Century vs. Dimensional ETF Trust | American Century vs. Vanguard Small Cap Index | American Century vs. First Trust Multi Manager | American Century vs. Vanguard SP Small Cap |
| Dimensional ETF vs. Schwab Fundamental International | Dimensional ETF vs. Schwab Fundamental Emerging | Dimensional ETF vs. Schwab Fundamental Small | Dimensional ETF vs. Schwab Fundamental Large |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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