Correlation Between SPDR Kensho and American Century

Can any of the company-specific risk be diversified away by investing in both SPDR Kensho 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 Kensho 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 Kensho New and American Century Mid, you can compare the effects of market volatilities on SPDR Kensho 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 Kensho with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Kensho and American Century.

Diversification Opportunities for SPDR Kensho and American Century

0.87

Correlation Coefficient

SPDR Kensho  American Century

Very poor diversification

The 3 months correlation between SPDR and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Kensho New and American Century Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Mid and SPDR Kensho 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 Kensho New 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 Mid has no effect on the direction of SPDR Kensho i.e., SPDR Kensho and American Century go up and down completely randomly.

Pair Corralation between SPDR Kensho and American Century

Given the investment horizon of 90 days SPDR Kensho New is expected to generate 1.27 times more return on investment than American Century. However, SPDR Kensho is 1.27 times more volatile than American Century Mid. It trades about 0.15 of its potential returns per unit of risk. American Century Mid is currently generating about 0.12 per unit of risk. If you would invest  4,829  in SPDR Kensho New on August 30, 2024 and sell it today you would earn a total of  597.00  from holding SPDR Kensho New or generate 12.36% return on investment over 90 days.

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

SPDR Kensho New  vs.  American Century Mid

SPDR Kensho New

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho New are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, SPDR Kensho may actually be approaching a critical reversion point that can send shares even higher in December 2024.

American Century Mid

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century Mid are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, American Century may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SPDR Kensho and American Century

The main advantage of trading using opposite SPDR Kensho and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Kensho 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 SPDR Kensho New and American Century Mid 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.