Correlation Between Amer Beacon and Deutsche Munications

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

By analyzing existing cross correlation between Amer Beacon Ark and Deutsche Munications Fund, you can compare the effects of market volatilities on Amer Beacon and Deutsche Munications 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 Amer Beacon with a short position of Deutsche Munications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amer Beacon and Deutsche Munications.

Diversification Opportunities for Amer Beacon and Deutsche Munications

0.95

Correlation Coefficient

Amer Beacon  Deutsche Munications

Almost no diversification

The 3 months correlation between Amer and Deutsche is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Amer Beacon Ark and Deutsche Munications Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Munications and Amer 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 Amer Beacon Ark are associated (or correlated) with Deutsche Munications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Munications has no effect on the direction of Amer Beacon i.e., Amer Beacon and Deutsche Munications go up and down completely randomly.

Pair Corralation between Amer Beacon and Deutsche Munications

Assuming the 90 days horizon Amer Beacon is expected to generate 1.52 times less return on investment than Deutsche Munications. In addition to that, Amer Beacon is 2.19 times more volatile than Deutsche Munications Fund. It trades about 0.03 of its total potential returns per unit of risk. Deutsche Munications Fund is currently generating about 0.11 per unit of volatility. If you would invest  2,766  in Deutsche Munications Fund on September 23, 2024 and sell it today you would earn a total of  1,207  from holding Deutsche Munications Fund or generate 43.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.72%
Values	Daily Returns

Amer Beacon Ark  vs.  Deutsche Munications Fund

Amer Beacon Ark

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amer Beacon Ark are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Amer Beacon showed solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Munications

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Amer Beacon and Deutsche Munications

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

The idea behind Amer Beacon Ark and Deutsche Munications Fund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.