Correlation Between Mesirow Financial and American Beacon

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

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

Diversification Opportunities for Mesirow Financial and American Beacon

0.58

Correlation Coefficient

Mesirow Financial  American Beacon

Very weak diversification

The 3 months correlation between Mesirow and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial High and American Beacon Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Funds and Mesirow Financial 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 Mesirow Financial High 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 Funds has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and American Beacon go up and down completely randomly.

Pair Corralation between Mesirow Financial and American Beacon

Assuming the 90 days horizon Mesirow Financial High is expected to under-perform the American Beacon. In addition to that, Mesirow Financial is 1.26 times more volatile than American Beacon Funds. It trades about -0.08 of its total potential returns per unit of risk. American Beacon Funds is currently generating about 0.08 per unit of volatility. If you would invest  844.00  in American Beacon Funds on December 30, 2024 and sell it today you would earn a total of  7.00  from holding American Beacon Funds or generate 0.83% return on investment over 90 days.

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

Mesirow Financial High  vs.  American Beacon Funds

Mesirow Financial High

Risk-Adjusted Performance

Very Weak

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

American Beacon Funds

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Funds are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 Mesirow Financial and American Beacon

The main advantage of trading using opposite Mesirow Financial and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesirow Financial 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 Mesirow Financial High and American Beacon Funds 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.