Correlation Between Amg River and American Beacon

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

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

Diversification Opportunities for Amg River and American Beacon

-0.62

Correlation Coefficient

Amg River  American Beacon

Excellent diversification

The 3 months correlation between Amg and American is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amg River Road and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small and Amg River 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 Amg River Road 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 Small has no effect on the direction of Amg River i.e., Amg River and American Beacon go up and down completely randomly.

Pair Corralation between Amg River and American Beacon

Assuming the 90 days horizon Amg River Road is expected to generate 6.42 times more return on investment than American Beacon. However, Amg River is 6.42 times more volatile than American Beacon Small. It trades about 0.23 of its potential returns per unit of risk. American Beacon Small is currently generating about -0.04 per unit of risk. If you would invest  964.00  in Amg River Road on September 12, 2024 and sell it today you would earn a total of  135.00  from holding Amg River Road or generate 14.0% return on investment over 90 days.

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

Amg River Road  vs.  American Beacon Small

Amg River Road

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amg River Road are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Amg River showed solid returns over the last few months and may actually be approaching a breakup point.

American Beacon Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Small 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.

Pair Trading with Amg River and American Beacon

The main advantage of trading using opposite Amg River and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amg River 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 Amg River Road and American Beacon Small 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.