Correlation Between The Short and American Beacon

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

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

Diversification Opportunities for The Short and American Beacon

0.53

Correlation Coefficient

The Short  American Beacon

Very weak diversification

The 3 months correlation between The and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding The Short Term and American Beacon The in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon and The Short 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 The Short Term 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 has no effect on the direction of The Short i.e., The Short and American Beacon go up and down completely randomly.

Pair Corralation between The Short and American Beacon

Assuming the 90 days horizon The Short is expected to generate 2.03 times less return on investment than American Beacon. But when comparing it to its historical volatility, The Short Term is 5.97 times less risky than American Beacon. It trades about 0.22 of its potential returns per unit of risk. American Beacon The is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,050  in American Beacon The on December 30, 2024 and sell it today you would earn a total of  68.00  from holding American Beacon The or generate 3.32% return on investment over 90 days.

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

The Short Term  vs.  American Beacon The

Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Short Term are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon The are ranked lower than 5 (%) 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 The Short and American Beacon

The main advantage of trading using opposite The Short and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Short 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 The Short Term and American Beacon The 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.