Correlation Between SPDR FTSE and American Century
Can any of the company-specific risk be diversified away by investing in both SPDR FTSE 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 FTSE 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 FTSE International and American Century Short, you can compare the effects of market volatilities on SPDR FTSE 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 FTSE with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR FTSE and American Century.
Diversification Opportunities for SPDR FTSE and American Century
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and American is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPDR FTSE International and American Century Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Short and SPDR FTSE 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 FTSE International 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 Short has no effect on the direction of SPDR FTSE i.e., SPDR FTSE and American Century go up and down completely randomly.
Pair Corralation between SPDR FTSE and American Century
Considering the 90-day investment horizon SPDR FTSE International is expected to under-perform the American Century. In addition to that, SPDR FTSE is 5.17 times more volatile than American Century Short. It trades about -0.06 of its total potential returns per unit of risk. American Century Short is currently generating about 0.19 per unit of volatility. If you would invest 5,107 in American Century Short on September 3, 2024 and sell it today you would earn a total of 20.00 from holding American Century Short or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR FTSE International vs. American Century Short
Performance |
| Timeline |
| SPDR FTSE International |
| American Century Short |
SPDR FTSE and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR FTSE and American Century
The main advantage of trading using opposite SPDR FTSE and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR FTSE 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 FTSE vs. SPDR Bloomberg Emerging | SPDR FTSE vs. Vanguard Emerging Markets | SPDR FTSE vs. SPDR Bloomberg Barclays | SPDR FTSE vs. VanEck JP Morgan |
| American Century vs. iShares 1 5 Year | American Century vs. SPDR Barclays Short | American Century vs. iShares Core 1 5 | American Century vs. iShares 0 5 Year |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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