Correlation Between ETRACS 2xMonthly and American Century
Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly 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 ETRACS 2xMonthly and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2xMonthly Pay and American Century STOXX, you can compare the effects of market volatilities on ETRACS 2xMonthly 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 ETRACS 2xMonthly with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and American Century.
Diversification Opportunities for ETRACS 2xMonthly and American Century
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ETRACS and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and American Century STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century STOXX and ETRACS 2xMonthly 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 ETRACS 2xMonthly Pay 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 STOXX has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and American Century go up and down completely randomly.
Pair Corralation between ETRACS 2xMonthly and American Century
Given the investment horizon of 90 days ETRACS 2xMonthly is expected to generate 1.1 times less return on investment than American Century. In addition to that, ETRACS 2xMonthly is 2.2 times more volatile than American Century STOXX. It trades about 0.05 of its total potential returns per unit of risk. American Century STOXX is currently generating about 0.13 per unit of volatility. If you would invest 4,829 in American Century STOXX on September 12, 2024 and sell it today you would earn a total of 1,539 from holding American Century STOXX or generate 31.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2xMonthly Pay vs. American Century STOXX
Performance |
| Timeline |
| ETRACS 2xMonthly Pay |
| American Century STOXX |
ETRACS 2xMonthly and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2xMonthly and American Century
The main advantage of trading using opposite ETRACS 2xMonthly and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly 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.| ETRACS 2xMonthly vs. ProShares Ultra Euro | ETRACS 2xMonthly vs. ProShares UltraShort Yen | ETRACS 2xMonthly vs. ProShares Ultra Telecommunications | ETRACS 2xMonthly vs. ProShares Ultra Consumer |
| American Century vs. American Century Quality | American Century vs. Invesco SP 500 | American Century vs. American Century Diversified | American Century vs. Invesco SP SmallCap |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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