Correlation Between ETF Series and American Century
Can any of the company-specific risk be diversified away by investing in both ETF Series 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 ETF Series and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETF Series Solutions and American Century ETF, you can compare the effects of market volatilities on ETF Series 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 ETF Series with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETF Series and American Century.
Diversification Opportunities for ETF Series and American Century
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ETF and American is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions 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 ETF Series 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 ETF Series Solutions 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 ETF Series i.e., ETF Series and American Century go up and down completely randomly.
Pair Corralation between ETF Series and American Century
Given the investment horizon of 90 days ETF Series Solutions is expected to generate 2.35 times more return on investment than American Century. However, ETF Series is 2.35 times more volatile than American Century ETF. It trades about 0.09 of its potential returns per unit of risk. American Century ETF is currently generating about 0.08 per unit of risk. If you would invest 2,141 in ETF Series Solutions on August 26, 2024 and sell it today you would earn a total of 1,210 from holding ETF Series Solutions or generate 56.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETF Series Solutions vs. American Century ETF
Performance |
| Timeline |
| ETF Series Solutions |
| American Century ETF |
ETF Series and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETF Series and American Century
The main advantage of trading using opposite ETF Series and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series 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.| ETF Series vs. Tidal Trust II | ETF Series vs. Tidal Trust II | ETF Series vs. First Trust Dorsey | ETF Series vs. Direxion Daily META |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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