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 Equity and American Century Mid, 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
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Equity and American Century Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Mid 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 Equity 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 Mid 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 Equity is expected to generate 1.46 times more return on investment than American Century. However, First Trust is 1.46 times more volatile than American Century Mid. It trades about 0.38 of its potential returns per unit of risk. American Century Mid is currently generating about 0.2 per unit of risk. If you would invest 11,245 in First Trust Equity on August 26, 2024 and sell it today you would earn a total of 1,602 from holding First Trust Equity or generate 14.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Equity vs. American Century Mid
Performance |
| Timeline |
| First Trust Equity |
| American Century Mid |
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 SP Spin Off | First Trust vs. Renaissance IPO ETF | First Trust vs. First Trust NYSE | First Trust vs. Invesco BuyBack Achievers |
| American Century vs. American Century Sustainable | American Century vs. American Century ETF | American Century vs. Sprott Focus Trust | American Century vs. American Century Quality |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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