Correlation Between SPACE and American Beacon

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

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

Diversification Opportunities for SPACE and American Beacon

0.57

Correlation Coefficient

SPACE  American Beacon

Very weak diversification

The 3 months correlation between SPACE and American is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens and SPACE 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 SPACE 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 Stephens has no effect on the direction of SPACE i.e., SPACE and American Beacon go up and down completely randomly.

Pair Corralation between SPACE and American Beacon

Assuming the 90 days horizon SPACE is expected to generate 2.7 times more return on investment than American Beacon. However, SPACE is 2.7 times more volatile than American Beacon Stephens. It trades about 0.01 of its potential returns per unit of risk. American Beacon Stephens is currently generating about -0.27 per unit of risk. If you would invest  50.00  in SPACE on October 9, 2024 and sell it today you would lose (1.00) from holding SPACE or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

SPACE  vs.  American Beacon Stephens

SPACE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Beacon Stephens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Stephens 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 SPACE and American Beacon

The main advantage of trading using opposite SPACE and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE 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 SPACE and American Beacon Stephens 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.