Correlation Between Astor Longshort and American Beacon

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

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

Diversification Opportunities for Astor Longshort and American Beacon

0.61

Correlation Coefficient

Astor Longshort  American Beacon

Poor diversification

The 3 months correlation between Astor and American is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Astor Longshort Fund and American Beacon Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Funds and Astor Longshort 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 Astor Longshort 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 Funds has no effect on the direction of Astor Longshort i.e., Astor Longshort and American Beacon go up and down completely randomly.

Pair Corralation between Astor Longshort and American Beacon

Assuming the 90 days horizon Astor Longshort Fund is expected to generate 2.07 times more return on investment than American Beacon. However, Astor Longshort is 2.07 times more volatile than American Beacon Funds. It trades about 0.13 of its potential returns per unit of risk. American Beacon Funds is currently generating about 0.27 per unit of risk. If you would invest  1,410  in Astor Longshort Fund on September 15, 2024 and sell it today you would earn a total of  11.00  from holding Astor Longshort Fund or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Astor Longshort Fund  vs.  American Beacon Funds

Astor Longshort

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astor Longshort Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Astor Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Funds

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Funds are ranked lower than 6 (%) 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 Astor Longshort and American Beacon

The main advantage of trading using opposite Astor Longshort and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astor Longshort 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 Astor Longshort Fund and American Beacon Funds 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.