Correlation Between Amer Beacon and Third Avenue

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

Diversification Opportunities for Amer Beacon and Third Avenue

-0.85

Correlation Coefficient

Amer Beacon  Third Avenue

Pay attention - limited upside

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

Pair Corralation between Amer Beacon and Third Avenue

Assuming the 90 days horizon Amer Beacon Ark is expected to generate 4.31 times more return on investment than Third Avenue. However, Amer Beacon is 4.31 times more volatile than Third Avenue International. It trades about -0.04 of its potential returns per unit of risk. Third Avenue International is currently generating about -0.43 per unit of risk. If you would invest  1,653  in Amer Beacon Ark on October 11, 2024 and sell it today you would lose (44.00) from holding Amer Beacon Ark or give up 2.66% of portfolio value over 90 days.

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

Amer Beacon Ark  vs.  Third Avenue International

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.

Third Avenue Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Third Avenue International has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Amer Beacon and Third Avenue

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

The idea behind Amer Beacon Ark and Third Avenue International 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.