Correlation Between IShares Inflation and American Century
Can any of the company-specific risk be diversified away by investing in both IShares Inflation 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 IShares Inflation and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Inflation Hedged and American Century Diversified, you can compare the effects of market volatilities on IShares Inflation 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 IShares Inflation with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Inflation and American Century.
Diversification Opportunities for IShares Inflation and American Century
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Inflation Hedged and American Century Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Div and IShares Inflation 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 iShares Inflation Hedged 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 Div has no effect on the direction of IShares Inflation i.e., IShares Inflation and American Century go up and down completely randomly.
Pair Corralation between IShares Inflation and American Century
Given the investment horizon of 90 days IShares Inflation is expected to generate 1.14 times less return on investment than American Century. In addition to that, IShares Inflation is 1.35 times more volatile than American Century Diversified. It trades about 0.04 of its total potential returns per unit of risk. American Century Diversified is currently generating about 0.07 per unit of volatility. If you would invest 4,193 in American Century Diversified on August 30, 2024 and sell it today you would earn a total of 509.00 from holding American Century Diversified or generate 12.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Inflation Hedged vs. American Century Diversified
Performance |
| Timeline |
| iShares Inflation Hedged |
| American Century Div |
IShares Inflation and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Inflation and American Century
The main advantage of trading using opposite IShares Inflation and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Inflation 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.| IShares Inflation vs. iShares Interest Rate | IShares Inflation vs. iShares Interest Rate | IShares Inflation vs. iShares Edge Investment | IShares Inflation vs. iShares Interest Rate |
| American Century vs. iShares Edge Investment | American Century vs. American Century STOXX | American Century vs. iShares Inflation Hedged | American Century vs. Franklin Liberty Investment |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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