Correlation Between Hotchkis Wiley and American Beacon

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

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

Diversification Opportunities for Hotchkis Wiley and American Beacon

-0.63

Correlation Coefficient

Hotchkis Wiley  American Beacon

Excellent diversification

The 3 months correlation between Hotchkis and American is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hotchkis Wiley Small and American Beacon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Inte and Hotchkis Wiley 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 Hotchkis Wiley Small 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 Inte has no effect on the direction of Hotchkis Wiley i.e., Hotchkis Wiley and American Beacon go up and down completely randomly.

Pair Corralation between Hotchkis Wiley and American Beacon

Assuming the 90 days horizon Hotchkis Wiley Small is expected to generate 1.31 times more return on investment than American Beacon. However, Hotchkis Wiley is 1.31 times more volatile than American Beacon International. It trades about 0.14 of its potential returns per unit of risk. American Beacon International is currently generating about -0.09 per unit of risk. If you would invest  7,844  in Hotchkis Wiley Small on September 2, 2024 and sell it today you would earn a total of  755.00  from holding Hotchkis Wiley Small or generate 9.63% return on investment over 90 days.

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

Hotchkis Wiley Small  vs.  American Beacon International

Hotchkis Wiley Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hotchkis Wiley Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Hotchkis Wiley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Beacon Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon International has generated negative risk-adjusted returns adding no value to fund investors. 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 Hotchkis Wiley and American Beacon

The main advantage of trading using opposite Hotchkis Wiley and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotchkis Wiley 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 Hotchkis Wiley Small and American Beacon International 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 Global Correlations module to find global opportunities by holding instruments from different markets.