Correlation Between Adams Diversified and American Beacon

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

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

Diversification Opportunities for Adams Diversified and American Beacon

0.86

Correlation Coefficient

Adams Diversified  American Beacon

Very poor diversification

The 3 months correlation between Adams and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and American Beacon Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ssi and Adams Diversified 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 Adams Diversified Equity are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Ssi has no effect on the direction of Adams Diversified i.e., Adams Diversified and American Beacon go up and down completely randomly.

Pair Corralation between Adams Diversified and American Beacon

Considering the 90-day investment horizon Adams Diversified Equity is expected to under-perform the American Beacon. In addition to that, Adams Diversified is 7.63 times more volatile than American Beacon Ssi. It trades about -0.07 of its total potential returns per unit of risk. American Beacon Ssi is currently generating about -0.04 per unit of volatility. If you would invest  999.00  in American Beacon Ssi on October 6, 2024 and sell it today you would lose (1.00) from holding American Beacon Ssi or give up 0.1% of portfolio value over 90 days.

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

Adams Diversified Equity  vs.  American Beacon Ssi

Adams Diversified Equity

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Diversified Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Adams Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Ssi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ssi are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adams Diversified and American Beacon

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

The idea behind Adams Diversified Equity and American Beacon Ssi 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.