Correlation Between Biotechnology Ultrasector and American Beacon

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

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

Diversification Opportunities for Biotechnology Ultrasector and American Beacon

-0.74

Correlation Coefficient

Biotechnology Ultrasector  American Beacon

Pay attention - limited upside

The 3 months correlation between Biotechnology and American is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Ultrasector Prof and American Beacon Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ssi and Biotechnology Ultrasector 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 Biotechnology Ultrasector Profund 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 Ssi has no effect on the direction of Biotechnology Ultrasector i.e., Biotechnology Ultrasector and American Beacon go up and down completely randomly.

Pair Corralation between Biotechnology Ultrasector and American Beacon

Assuming the 90 days horizon Biotechnology Ultrasector Profund is expected to under-perform the American Beacon. In addition to that, Biotechnology Ultrasector is 55.22 times more volatile than American Beacon Ssi. It trades about -0.17 of its total potential returns per unit of risk. American Beacon Ssi is currently generating about 0.46 per unit of volatility. If you would invest  990.00  in American Beacon Ssi on December 2, 2024 and sell it today you would earn a total of  19.00  from holding American Beacon Ssi or generate 1.92% return on investment over 90 days.

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

Biotechnology Ultrasector Prof  vs.  American Beacon Ssi

Biotechnology Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biotechnology Ultrasector Profund 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 forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

American Beacon Ssi

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ssi are ranked lower than 36 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking 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 Biotechnology Ultrasector and American Beacon

The main advantage of trading using opposite Biotechnology Ultrasector and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Ultrasector 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 Biotechnology Ultrasector Profund and American Beacon Ssi 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.