Correlation Between SmartETFs Dividend and American Century

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

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

Diversification Opportunities for SmartETFs Dividend and American Century

0.36

Correlation Coefficient

SmartETFs Dividend  American Century

Weak diversification

The 3 months correlation between SmartETFs and American is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding SmartETFs Dividend Builder 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 SmartETFs Dividend 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 SmartETFs Dividend Builder 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 SmartETFs Dividend i.e., SmartETFs Dividend and American Century go up and down completely randomly.

Pair Corralation between SmartETFs Dividend and American Century

Given the investment horizon of 90 days SmartETFs Dividend is expected to generate 4.3 times less return on investment than American Century. But when comparing it to its historical volatility, SmartETFs Dividend Builder is 1.32 times less risky than American Century. It trades about 0.05 of its potential returns per unit of risk. American Century ETF is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,011  in American Century ETF on September 4, 2024 and sell it today you would earn a total of  496.00  from holding American Century ETF or generate 8.25% return on investment over 90 days.

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

SmartETFs Dividend Builder  vs.  American Century ETF

SmartETFs Dividend

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Dividend Builder are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SmartETFs Dividend is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

American Century ETF

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SmartETFs Dividend and American Century

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

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.