Correlation Between Global Gold and American Beacon

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

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

Diversification Opportunities for Global Gold and American Beacon

-0.36

Correlation Coefficient

Global Gold  American Beacon

Very good diversification

The 3 months correlation between Global and American is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and American Beacon Twentyfour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Twen and Global Gold 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 Global Gold Fund 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 Twen has no effect on the direction of Global Gold i.e., Global Gold and American Beacon go up and down completely randomly.

Pair Corralation between Global Gold and American Beacon

Assuming the 90 days horizon Global Gold Fund is expected to under-perform the American Beacon. In addition to that, Global Gold is 12.44 times more volatile than American Beacon Twentyfour. It trades about -0.11 of its total potential returns per unit of risk. American Beacon Twentyfour is currently generating about -0.38 per unit of volatility. If you would invest  863.00  in American Beacon Twentyfour on October 7, 2024 and sell it today you would lose (10.00) from holding American Beacon Twentyfour or give up 1.16% of portfolio value over 90 days.

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

Global Gold Fund  vs.  American Beacon Twentyfour

Global Gold Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Beacon Twen

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Twentyfour are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Global Gold and American Beacon

The main advantage of trading using opposite Global Gold and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold 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 Global Gold Fund and American Beacon Twentyfour 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.