Correlation Between EA Series and American Beacon

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

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

Diversification Opportunities for EA Series and American Beacon

0.8

Correlation Coefficient

EA Series  American Beacon

Very poor diversification

The 3 months correlation between DRLL and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and American Beacon Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Select and EA Series 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 EA Series Trust 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 Select has no effect on the direction of EA Series i.e., EA Series and American Beacon go up and down completely randomly.

Pair Corralation between EA Series and American Beacon

Given the investment horizon of 90 days EA Series Trust is expected to generate 0.93 times more return on investment than American Beacon. However, EA Series Trust is 1.08 times less risky than American Beacon. It trades about -0.06 of its potential returns per unit of risk. American Beacon Select is currently generating about -0.09 per unit of risk. If you would invest  3,012  in EA Series Trust on November 28, 2024 and sell it today you would lose (160.00) from holding EA Series Trust or give up 5.31% of portfolio value over 90 days.

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

EA Series Trust  vs.  American Beacon Select

EA Series Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days EA Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, EA Series is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

American Beacon Select

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Beacon Select has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with EA Series and American Beacon

The main advantage of trading using opposite EA Series and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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 EA Series Trust and American Beacon Select 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.