Correlation Between Amer Beacon and Jacob Micro

Can any of the company-specific risk be diversified away by investing in both Amer Beacon and Jacob Micro 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 Jacob Micro 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 Jacob Micro Cap, you can compare the effects of market volatilities on Amer Beacon and Jacob Micro 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 Jacob Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amer Beacon and Jacob Micro.

Diversification Opportunities for Amer Beacon and Jacob Micro

0.94

Correlation Coefficient

Amer Beacon  Jacob Micro

Almost no diversification

The 3 months correlation between Amer and Jacob is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Amer Beacon Ark and Jacob Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacob Micro Cap 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 Jacob Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacob Micro Cap has no effect on the direction of Amer Beacon i.e., Amer Beacon and Jacob Micro go up and down completely randomly.

Pair Corralation between Amer Beacon and Jacob Micro

Assuming the 90 days horizon Amer Beacon Ark is expected to generate 1.8 times more return on investment than Jacob Micro. However, Amer Beacon is 1.8 times more volatile than Jacob Micro Cap. It trades about 0.22 of its potential returns per unit of risk. Jacob Micro Cap is currently generating about 0.16 per unit of risk. If you would invest  1,226  in Amer Beacon Ark on September 16, 2024 and sell it today you would earn a total of  417.00  from holding Amer Beacon Ark or generate 34.01% return on investment over 90 days.

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

Amer Beacon Ark  vs.  Jacob Micro Cap

Amer Beacon Ark

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amer Beacon Ark are ranked lower than 17 (%) 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.

Jacob Micro Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jacob Micro Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Jacob Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amer Beacon and Jacob Micro

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

The idea behind Amer Beacon Ark and Jacob Micro Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.