Correlation Between American Beacon and Americafirst Tactical

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

By analyzing existing cross correlation between American Beacon Ark and Americafirst Tactical Alpha, you can compare the effects of market volatilities on American Beacon and Americafirst Tactical 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 Americafirst Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Americafirst Tactical.

Diversification Opportunities for American Beacon and Americafirst Tactical

0.85

Correlation Coefficient

American Beacon  Americafirst Tactical

Very poor diversification

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

Pair Corralation between American Beacon and Americafirst Tactical

Assuming the 90 days horizon American Beacon Ark is expected to generate 1.59 times more return on investment than Americafirst Tactical. However, American Beacon is 1.59 times more volatile than Americafirst Tactical Alpha. It trades about 0.16 of its potential returns per unit of risk. Americafirst Tactical Alpha is currently generating about 0.08 per unit of risk. If you would invest  1,297  in American Beacon Ark on October 22, 2024 and sell it today you would earn a total of  340.00  from holding American Beacon Ark or generate 26.21% return on investment over 90 days.

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

American Beacon Ark  vs.  Americafirst Tactical Alpha

American Beacon Ark

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American 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, American Beacon showed solid returns over the last few months and may actually be approaching a breakup point.

Americafirst Tactical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Americafirst Tactical Alpha are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Americafirst Tactical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with American Beacon and Americafirst Tactical

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

The idea behind American Beacon Ark and Americafirst Tactical Alpha 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.