Correlation Between Aqr Large and American Beacon

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

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

Diversification Opportunities for Aqr Large and American Beacon

0.83

Correlation Coefficient

Aqr Large  American Beacon

Very poor diversification

The 3 months correlation between Aqr and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Large Cap and American Beacon Bridgeway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Bridgeway and Aqr Large 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 Aqr Large Cap 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 Bridgeway has no effect on the direction of Aqr Large i.e., Aqr Large and American Beacon go up and down completely randomly.

Pair Corralation between Aqr Large and American Beacon

Assuming the 90 days horizon Aqr Large Cap is expected to generate 0.95 times more return on investment than American Beacon. However, Aqr Large Cap is 1.05 times less risky than American Beacon. It trades about -0.11 of its potential returns per unit of risk. American Beacon Bridgeway is currently generating about -0.16 per unit of risk. If you would invest  2,449  in Aqr Large Cap on September 22, 2024 and sell it today you would lose (264.00) from holding Aqr Large Cap or give up 10.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.73%
Values	Daily Returns

Aqr Large Cap  vs.  American Beacon Bridgeway

Aqr Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Large Cap 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 Bridgeway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Bridgeway 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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Aqr Large and American Beacon

The main advantage of trading using opposite Aqr Large and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Large 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 Aqr Large Cap and American Beacon Bridgeway 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.