Correlation Between American Century and SPDR MarketAxess

Can any of the company-specific risk be diversified away by investing in both American Century and SPDR MarketAxess 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 SPDR MarketAxess into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Century Investments and SPDR MarketAxess Investment, you can compare the effects of market volatilities on American Century and SPDR MarketAxess 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 SPDR MarketAxess. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and SPDR MarketAxess.

Diversification Opportunities for American Century and SPDR MarketAxess

-0.76

Correlation Coefficient

American Century  SPDR MarketAxess

Pay attention - limited upside

The 3 months correlation between American and SPDR is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Century Investments and SPDR MarketAxess Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MarketAxess Inv 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 Investments are associated (or correlated) with SPDR MarketAxess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MarketAxess Inv has no effect on the direction of American Century i.e., American Century and SPDR MarketAxess go up and down completely randomly.

Pair Corralation between American Century and SPDR MarketAxess

Given the investment horizon of 90 days American Century Investments is expected to under-perform the SPDR MarketAxess. But the etf apears to be less risky and, when comparing its historical volatility, American Century Investments is 1.59 times less risky than SPDR MarketAxess. The etf trades about -0.11 of its potential returns per unit of risk. The SPDR MarketAxess Investment is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  9,712  in SPDR MarketAxess Investment on September 4, 2024 and sell it today you would lose (51.00) from holding SPDR MarketAxess Investment or give up 0.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	35.94%
Values	Daily Returns

American Century Investments  vs.  SPDR MarketAxess Investment

American Century Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, American Century is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SPDR MarketAxess Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MarketAxess Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, SPDR MarketAxess is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Century and SPDR MarketAxess

The main advantage of trading using opposite American Century and SPDR MarketAxess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, SPDR MarketAxess 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 SPDR MarketAxess will offset losses from the drop in SPDR MarketAxess' long position.

The idea behind American Century Investments and SPDR MarketAxess Investment 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.