Correlation Between American Century and IShares Yield
Can any of the company-specific risk be diversified away by investing in both American Century and IShares Yield 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 American Century and IShares Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Multisector and iShares Yield Optimized, you can compare the effects of market volatilities on American Century and IShares Yield 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 American Century with a short position of IShares Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and IShares Yield.
Diversification Opportunities for American Century and IShares Yield
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Century Multisector and iShares Yield Optimized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Yield Optimized and American Century 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 American Century Multisector are associated (or correlated) with IShares Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Yield Optimized has no effect on the direction of American Century i.e., American Century and IShares Yield go up and down completely randomly.
Pair Corralation between American Century and IShares Yield
Given the investment horizon of 90 days American Century is expected to generate 1.41 times less return on investment than IShares Yield. But when comparing it to its historical volatility, American Century Multisector is 1.07 times less risky than IShares Yield. It trades about 0.09 of its potential returns per unit of risk. iShares Yield Optimized is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,241 in iShares Yield Optimized on August 31, 2024 and sell it today you would earn a total of 16.00 from holding iShares Yield Optimized or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Multisector vs. iShares Yield Optimized
Performance |
| Timeline |
| American Century Mul |
| iShares Yield Optimized |
American Century and IShares Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and IShares Yield
The main advantage of trading using opposite American Century and IShares Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, IShares Yield 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 IShares Yield will offset losses from the drop in IShares Yield's long position.The idea behind American Century Multisector and iShares Yield Optimized pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Yield vs. iShares Interest Rate | IShares Yield vs. iShares Agency Bond | IShares Yield vs. iShares JP Morgan | IShares Yield vs. iShares Interest Rate |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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