Correlation Between Avantis Responsible and American Century

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

By analyzing existing cross correlation between Avantis Responsible Emerging and American Century ETF, you can compare the effects of market volatilities on Avantis Responsible 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 Avantis Responsible with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Responsible and American Century.

Diversification Opportunities for Avantis Responsible and American Century

0.47

Correlation Coefficient

Avantis Responsible  American Century

Very weak diversification

The 3 months correlation between Avantis and American is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Responsible Emerging 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 Avantis Responsible 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 Avantis Responsible Emerging 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 Avantis Responsible i.e., Avantis Responsible and American Century go up and down completely randomly.

Pair Corralation between Avantis Responsible and American Century

Given the investment horizon of 90 days Avantis Responsible is expected to generate 1.01 times less return on investment than American Century. In addition to that, Avantis Responsible is 1.11 times more volatile than American Century ETF. It trades about 0.06 of its total potential returns per unit of risk. American Century ETF is currently generating about 0.07 per unit of volatility. If you would invest  4,498  in American Century ETF on September 14, 2024 and sell it today you would earn a total of  1,328  from holding American Century ETF or generate 29.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Avantis Responsible Emerging  vs.  American Century ETF

Avantis Responsible

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Responsible Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Avantis Responsible is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Century ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, American Century is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avantis Responsible and American Century

The main advantage of trading using opposite Avantis Responsible and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Responsible 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 Avantis Responsible Emerging 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.