Correlation Between Artisan Mid and American Beacon

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

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

Diversification Opportunities for Artisan Mid and American Beacon

0.8

Correlation Coefficient

Artisan Mid  American Beacon

Very poor diversification

The 3 months correlation between Artisan and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Mid Cap 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 Artisan Mid 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 Artisan Mid 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 Small has no effect on the direction of Artisan Mid i.e., Artisan Mid and American Beacon go up and down completely randomly.

Pair Corralation between Artisan Mid and American Beacon

Assuming the 90 days horizon Artisan Mid Cap is expected to under-perform the American Beacon. In addition to that, Artisan Mid is 1.74 times more volatile than American Beacon Small. It trades about -0.25 of its total potential returns per unit of risk. American Beacon Small is currently generating about -0.38 per unit of volatility. If you would invest  2,702  in American Beacon Small on October 7, 2024 and sell it today you would lose (374.00) from holding American Beacon Small or give up 13.84% of portfolio value over 90 days.

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

Artisan Mid Cap  vs.  American Beacon Small

Artisan Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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.

Pair Trading with Artisan Mid and American Beacon

The main advantage of trading using opposite Artisan Mid and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan Mid 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 Artisan Mid Cap 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.