Correlation Between Avantis Small and American Century
Can any of the company-specific risk be diversified away by investing in both Avantis Small 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 Small 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 Small Cap and American Century ETF, you can compare the effects of market volatilities on Avantis Small 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 Small with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and American Century.
Diversification Opportunities for Avantis Small and American Century
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Avantis and American is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap 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 Small 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 Small Cap 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 Small i.e., Avantis Small and American Century go up and down completely randomly.
Pair Corralation between Avantis Small and American Century
Given the investment horizon of 90 days Avantis Small Cap is expected to generate 1.0 times more return on investment than American Century. However, Avantis Small Cap is 1.0 times less risky than American Century. It trades about 0.25 of its potential returns per unit of risk. American Century ETF is currently generating about 0.24 per unit of risk. If you would invest 9,492 in Avantis Small Cap on August 26, 2024 and sell it today you would earn a total of 986.00 from holding Avantis Small Cap or generate 10.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantis Small Cap vs. American Century ETF
Performance |
| Timeline |
| Avantis Small Cap |
| American Century ETF |
Avantis Small and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis Small and American Century
The main advantage of trading using opposite Avantis Small and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Small 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 Small vs. Invesco SP SmallCap | Avantis Small vs. Invesco SP MidCap | Avantis Small vs. Pacer Small Cap |
| American Century vs. Invesco SP SmallCap | American Century vs. Invesco SP MidCap | American Century vs. Pacer Small Cap |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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