Correlation Between TSJA and American Century
Can any of the company-specific risk be diversified away by investing in both TSJA 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 TSJA and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TSJA and American Century ETF, you can compare the effects of market volatilities on TSJA 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 TSJA with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of TSJA and American Century.
Diversification Opportunities for TSJA and American Century
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between TSJA and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding TSJA 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 TSJA 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 TSJA 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 TSJA i.e., TSJA and American Century go up and down completely randomly.
Pair Corralation between TSJA and American Century
Given the investment horizon of 90 days TSJA is expected to generate 1.65 times less return on investment than American Century. But when comparing it to its historical volatility, TSJA is 1.69 times less risky than American Century. It trades about 0.12 of its potential returns per unit of risk. American Century ETF is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,396 in American Century ETF on August 27, 2024 and sell it today you would earn a total of 4,886 from holding American Century ETF or generate 90.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 31.85% |
| Values | Daily Returns |
TSJA vs. American Century ETF
Performance |
| Timeline |
| TSJA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| American Century ETF |
TSJA and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TSJA and American Century
The main advantage of trading using opposite TSJA and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSJA 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.The idea behind TSJA and American Century ETF 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.| American Century vs. Invesco DWA Technology | American Century vs. CNX Resources Corp | American Century vs. Natural Resource Partners | American Century vs. Albertsons Companies |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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