Correlation Between American Beacon and UBS AG

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

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

Diversification Opportunities for American Beacon and UBS AG

0.43

Correlation Coefficient

American Beacon  UBS AG

Very weak diversification

The 3 months correlation between American and UBS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Select and UBS AG London in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS AG London and American Beacon 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 American Beacon Select are associated (or correlated) with UBS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS AG London has no effect on the direction of American Beacon i.e., American Beacon and UBS AG go up and down completely randomly.

Pair Corralation between American Beacon and UBS AG

Given the investment horizon of 90 days American Beacon is expected to generate 2.85 times less return on investment than UBS AG. In addition to that, American Beacon is 1.52 times more volatile than UBS AG London. It trades about 0.04 of its total potential returns per unit of risk. UBS AG London is currently generating about 0.18 per unit of volatility. If you would invest  2,471  in UBS AG London on December 28, 2024 and sell it today you would earn a total of  315.00  from holding UBS AG London or generate 12.75% return on investment over 90 days.

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

American Beacon Select  vs.  UBS AG London

American Beacon Select

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Select are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, American Beacon is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

UBS AG London

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS AG London are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, UBS AG sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Beacon and UBS AG

The main advantage of trading using opposite American Beacon and UBS AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, UBS AG 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 UBS AG will offset losses from the drop in UBS AG's long position.

The idea behind American Beacon Select and UBS AG London 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 Stocks Directory module to find actively traded stocks across global markets.