Correlation Between American Beacon and American Mutual

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

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

Diversification Opportunities for American Beacon and American Mutual

0.0

Correlation Coefficient

American Beacon  American Mutual

Pay attention - limited upside

The 3 months correlation between American and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Mid Cap and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual 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 Mid Cap are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of American Beacon i.e., American Beacon and American Mutual go up and down completely randomly.

Pair Corralation between American Beacon and American Mutual

If you would invest (100.00) in American Mutual Fund on December 1, 2024 and sell it today you would earn a total of  100.00  from holding American Mutual Fund or generate -100.0% return on investment over 90 days.

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

American Beacon Mid Cap  vs.  American Mutual Fund

American Beacon Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Beacon Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Mutual

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Mutual Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, American Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Beacon and American Mutual

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

The idea behind American Beacon Mid Cap and American Mutual Fund 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.