Correlation Between American Beacon and Advisors Capital

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

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

Diversification Opportunities for American Beacon and Advisors Capital

0.81

Correlation Coefficient

American Beacon  Advisors Capital

Very poor diversification

The 3 months correlation between American and Advisors is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Bridgeway and Advisors Capital Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Capital Smallmid and American Beacon 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 American Beacon Bridgeway are associated (or correlated) with Advisors Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Capital Smallmid has no effect on the direction of American Beacon i.e., American Beacon and Advisors Capital go up and down completely randomly.

Pair Corralation between American Beacon and Advisors Capital

Assuming the 90 days horizon American Beacon Bridgeway is expected to generate 0.71 times more return on investment than Advisors Capital. However, American Beacon Bridgeway is 1.42 times less risky than Advisors Capital. It trades about 0.01 of its potential returns per unit of risk. Advisors Capital Smallmid is currently generating about -0.06 per unit of risk. If you would invest  2,279  in American Beacon Bridgeway on December 30, 2024 and sell it today you would earn a total of  10.00  from holding American Beacon Bridgeway or generate 0.44% return on investment over 90 days.

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

American Beacon Bridgeway  vs.  Advisors Capital Smallmid

American Beacon Bridgeway

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Bridgeway are ranked lower than 1 (%) 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.

Advisors Capital Smallmid

Risk-Adjusted Performance

Very Weak

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

Pair Trading with American Beacon and Advisors Capital

The main advantage of trading using opposite American Beacon and Advisors Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Advisors Capital 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 Advisors Capital will offset losses from the drop in Advisors Capital's long position.

The idea behind American Beacon Bridgeway and Advisors Capital Smallmid 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.