Correlation Between SPDR Portfolio and American Century
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio 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 SPDR Portfolio and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and American Century ETF, you can compare the effects of market volatilities on SPDR Portfolio 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 SPDR Portfolio with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and American Century.
Diversification Opportunities for SPDR Portfolio and American Century
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP 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 SPDR Portfolio 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 SPDR Portfolio SP 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 SPDR Portfolio i.e., SPDR Portfolio and American Century go up and down completely randomly.
Pair Corralation between SPDR Portfolio and American Century
Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.02 times less return on investment than American Century. But when comparing it to its historical volatility, SPDR Portfolio SP is 1.03 times less risky than American Century. It trades about 0.14 of its potential returns per unit of risk. American Century ETF is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,108 in American Century ETF on September 1, 2024 and sell it today you would earn a total of 936.00 from holding American Century ETF or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
SPDR Portfolio SP vs. American Century ETF
Performance |
| Timeline |
| SPDR Portfolio SP |
| American Century ETF |
SPDR Portfolio and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and American Century
The main advantage of trading using opposite SPDR Portfolio and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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.| SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. Invesco NASDAQ 100 | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP |
| American Century vs. Vanguard Total Stock | American Century vs. SPDR SP 500 | American Century vs. iShares Core SP | American Century vs. Vanguard Dividend Appreciation |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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