Correlation Between American Beacon and Large Pany

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

By analyzing existing cross correlation between American Beacon Balanced and Large Pany Value, you can compare the effects of market volatilities on American Beacon and Large Pany 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 Beacon with a short position of Large Pany. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Large Pany.

Diversification Opportunities for American Beacon and Large Pany

0.85

Correlation Coefficient

American Beacon  Large Pany

Very poor diversification

The 3 months correlation between American and Large is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Balanced and Large Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Pany Value and American Beacon 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 Beacon Balanced are associated (or correlated) with Large Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Pany Value has no effect on the direction of American Beacon i.e., American Beacon and Large Pany go up and down completely randomly.

Pair Corralation between American Beacon and Large Pany

Assuming the 90 days horizon American Beacon Balanced is expected to under-perform the Large Pany. In addition to that, American Beacon is 1.05 times more volatile than Large Pany Value. It trades about -0.34 of its total potential returns per unit of risk. Large Pany Value is currently generating about -0.36 per unit of volatility. If you would invest  1,156  in Large Pany Value on September 29, 2024 and sell it today you would lose (145.00) from holding Large Pany Value or give up 12.54% of portfolio value over 90 days.

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

American Beacon Balanced  vs.  Large Pany Value

American Beacon Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Large Pany Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Pany Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with American Beacon and Large Pany

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

The idea behind American Beacon Balanced and Large Pany Value 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.