Correlation Between Nasdaq-100(r) and American Century
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) 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 Nasdaq-100(r) and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and American Century Equity, you can compare the effects of market volatilities on Nasdaq-100(r) 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 Nasdaq-100(r) with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and American Century.
Diversification Opportunities for Nasdaq-100(r) and American Century
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq-100(r) and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and American Century Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Equity and Nasdaq-100(r) 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 Nasdaq 100 2x Strategy 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 Equity has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and American Century go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and American Century
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 4.14 times more return on investment than American Century. However, Nasdaq-100(r) is 4.14 times more volatile than American Century Equity. It trades about 0.11 of its potential returns per unit of risk. American Century Equity is currently generating about 0.17 per unit of risk. If you would invest 55,321 in Nasdaq 100 2x Strategy on August 29, 2024 and sell it today you would earn a total of 2,735 from holding Nasdaq 100 2x Strategy or generate 4.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. American Century Equity
Performance |
| Timeline |
| Nasdaq 100 2x |
| American Century Equity |
Nasdaq-100(r) and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and American Century
The main advantage of trading using opposite Nasdaq-100(r) and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) 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.| Nasdaq-100(r) vs. Nasdaq 100 2x Strategy | Nasdaq-100(r) vs. Direxion Monthly Nasdaq 100 | Nasdaq-100(r) vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Nasdaq-100(r) vs. Nasdaq 100 2x Strategy |
| American Century vs. Franklin Lifesmart Retirement | American Century vs. Jp Morgan Smartretirement | American Century vs. American Funds Retirement | American Century vs. Wisdomtree Siegel Moderate |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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