Correlation Between First Trust and American Century
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Preferred and American Century ETF, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and American Century.
Diversification Opportunities for First Trust and American Century
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Preferred 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 First Trust 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 First Trust Preferred 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 First Trust i.e., First Trust and American Century go up and down completely randomly.
Pair Corralation between First Trust and American Century
Considering the 90-day investment horizon First Trust Preferred is expected to under-perform the American Century. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Preferred is 1.49 times less risky than American Century. The etf trades about -0.18 of its potential returns per unit of risk. The American Century ETF is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 3,771 in American Century ETF on August 25, 2024 and sell it today you would lose (30.00) from holding American Century ETF or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Preferred vs. American Century ETF
Performance |
| Timeline |
| First Trust Preferred |
| American Century ETF |
First Trust and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and American Century
The main advantage of trading using opposite First Trust and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
| American Century vs. ETF Series Solutions | American Century vs. Aquagold International | American Century vs. Morningstar Unconstrained Allocation | American Century vs. High Yield Municipal Fund |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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