Correlation Between Baird Smallmid and American Beacon
Can any of the company-specific risk be diversified away by investing in both Baird Smallmid 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 Baird Smallmid and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baird Smallmid Cap and American Beacon Twentyfour, you can compare the effects of market volatilities on Baird Smallmid 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 Baird Smallmid with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Smallmid and American Beacon.
Diversification Opportunities for Baird Smallmid and American Beacon
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baird and American is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallmid Cap and American Beacon Twentyfour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Twen and Baird Smallmid 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 Baird Smallmid 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 Twen has no effect on the direction of Baird Smallmid i.e., Baird Smallmid and American Beacon go up and down completely randomly.
Pair Corralation between Baird Smallmid and American Beacon
Assuming the 90 days horizon Baird Smallmid Cap is expected to generate 12.46 times more return on investment than American Beacon. However, Baird Smallmid is 12.46 times more volatile than American Beacon Twentyfour. It trades about 0.05 of its potential returns per unit of risk. American Beacon Twentyfour is currently generating about 0.3 per unit of risk. If you would invest 1,456 in Baird Smallmid Cap on October 5, 2024 and sell it today you would earn a total of 241.00 from holding Baird Smallmid Cap or generate 16.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Baird Smallmid Cap vs. American Beacon Twentyfour
Performance |
Timeline |
Baird Smallmid Cap |
American Beacon Twen |
Baird Smallmid and American Beacon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Baird Smallmid and American Beacon
The main advantage of trading using opposite Baird Smallmid and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Smallmid 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.Baird Smallmid vs. Nebraska Municipal Fund | Baird Smallmid vs. Semiconductor Ultrasector Profund | Baird Smallmid vs. Growth Strategy Fund | Baird Smallmid vs. Eic Value Fund |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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