Correlation Between IShares Inflation and American Century

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

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

Diversification Opportunities for IShares Inflation and American Century

0.76

Correlation Coefficient

IShares Inflation  American Century

Poor diversification

The 3 months correlation between IShares and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Inflation Hedged and American Century Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Div and IShares Inflation 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 iShares Inflation Hedged 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 Div has no effect on the direction of IShares Inflation i.e., IShares Inflation and American Century go up and down completely randomly.

Pair Corralation between IShares Inflation and American Century

Given the investment horizon of 90 days iShares Inflation Hedged is expected to generate 1.05 times more return on investment than American Century. However, IShares Inflation is 1.05 times more volatile than American Century Diversified. It trades about 0.02 of its potential returns per unit of risk. American Century Diversified is currently generating about -0.04 per unit of risk. If you would invest  2,620  in iShares Inflation Hedged on September 12, 2024 and sell it today you would earn a total of  13.00  from holding iShares Inflation Hedged or generate 0.5% return on investment over 90 days.

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

iShares Inflation Hedged  vs.  American Century Diversified

iShares Inflation Hedged

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Inflation Hedged are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, IShares Inflation is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

American Century Div

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century Diversified has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, American Century is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Inflation and American Century

The main advantage of trading using opposite IShares Inflation and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Inflation 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 iShares Inflation Hedged and American Century Diversified 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.