Correlation Between Avantis Core and American Century
Can any of the company-specific risk be diversified away by investing in both Avantis Core and American Century 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 Avantis Core and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantis Core Fixed and American Century ETF, you can compare the effects of market volatilities on Avantis Core and American Century 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 Avantis Core with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Core and American Century.
Diversification Opportunities for Avantis Core and American Century
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Avantis and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Core Fixed and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF and Avantis Core 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 Avantis Core Fixed are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of Avantis Core i.e., Avantis Core and American Century go up and down completely randomly.
Pair Corralation between Avantis Core and American Century
Given the investment horizon of 90 days Avantis Core Fixed is expected to under-perform the American Century. In addition to that, Avantis Core is 2.55 times more volatile than American Century ETF. It trades about -0.06 of its total potential returns per unit of risk. American Century ETF is currently generating about -0.05 per unit of volatility. If you would invest 4,641 in American Century ETF on August 24, 2024 and sell it today you would lose (7.00) from holding American Century ETF or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Avantis Core Fixed vs. American Century ETF
Performance |
| Timeline |
| Avantis Core Fixed |
| American Century ETF |
Avantis Core and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis Core and American Century
The main advantage of trading using opposite Avantis Core and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Core position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.| Avantis Core vs. American Century ETF | Avantis Core vs. Avantis Core Municipal | Avantis Core vs. Avantis International Equity | Avantis Core vs. Avantis Emerging Markets |
| American Century vs. Avantis Core Fixed | American Century vs. Avantis Core Municipal | American Century vs. Avantis Emerging Markets | American Century vs. Avantis International Equity |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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