Correlation Between Catalyst/millburn and American Beacon

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

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

Diversification Opportunities for Catalyst/millburn and American Beacon

-0.83

Correlation Coefficient

Catalyst/millburn  American Beacon

Pay attention - limited upside

The 3 months correlation between Catalyst/millburn and American is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Catalystmillburn Hedge Strateg and American Beacon Garcia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Garcia and Catalyst/millburn 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 Catalystmillburn Hedge Strategy 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 Garcia has no effect on the direction of Catalyst/millburn i.e., Catalyst/millburn and American Beacon go up and down completely randomly.

Pair Corralation between Catalyst/millburn and American Beacon

Assuming the 90 days horizon Catalystmillburn Hedge Strategy is expected to under-perform the American Beacon. In addition to that, Catalyst/millburn is 1.73 times more volatile than American Beacon Garcia. It trades about -0.04 of its total potential returns per unit of risk. American Beacon Garcia is currently generating about 0.12 per unit of volatility. If you would invest  831.00  in American Beacon Garcia on December 26, 2024 and sell it today you would earn a total of  23.00  from holding American Beacon Garcia or generate 2.77% return on investment over 90 days.

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

Catalystmillburn Hedge Strateg  vs.  American Beacon Garcia

Catalystmillburn Hedge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalystmillburn Hedge Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Catalyst/millburn is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Garcia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Garcia are ranked lower than 9 (%) 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 Catalyst/millburn and American Beacon

The main advantage of trading using opposite Catalyst/millburn and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst/millburn 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 Catalystmillburn Hedge Strategy and American Beacon Garcia 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.