Correlation Between American Century and Xtrackers
Can any of the company-specific risk be diversified away by investing in both American Century and Xtrackers 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 Xtrackers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Quality and Xtrackers SP 500, you can compare the effects of market volatilities on American Century and Xtrackers 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 Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Xtrackers.
Diversification Opportunities for American Century and Xtrackers
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Xtrackers is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Century Quality and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 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 Quality are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of American Century i.e., American Century and Xtrackers go up and down completely randomly.
Pair Corralation between American Century and Xtrackers
Given the investment horizon of 90 days American Century Quality is expected to generate 1.16 times more return on investment than Xtrackers. However, American Century is 1.16 times more volatile than Xtrackers SP 500. It trades about 0.12 of its potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.11 per unit of risk. If you would invest 5,948 in American Century Quality on August 30, 2024 and sell it today you would earn a total of 4,337 from holding American Century Quality or generate 72.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Century Quality vs. Xtrackers SP 500
Performance |
| Timeline |
| American Century Quality |
| Xtrackers SP 500 |
American Century and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Century and Xtrackers
The main advantage of trading using opposite American Century and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Xtrackers 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 Xtrackers will offset losses from the drop in Xtrackers' long position.| American Century vs. American Century STOXX | American Century vs. American Century Quality | American Century vs. Nuveen ESG Large Cap | American Century vs. Invesco SP 500 |
| Xtrackers vs. Xtrackers MSCI USA | Xtrackers vs. iShares ESG MSCI | Xtrackers vs. SPDR SP 500 | Xtrackers vs. iShares MSCI USA |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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