Correlation Between American Beacon and FT Vest

Can any of the company-specific risk be diversified away by investing in both American Beacon and FT Vest 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 FT Vest 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 FT Vest Technology, you can compare the effects of market volatilities on American Beacon and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and FT Vest.

Diversification Opportunities for American Beacon and FT Vest

0.62

Correlation Coefficient

American Beacon  FT Vest

Poor diversification

The 3 months correlation between American and TDVI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Select and FT Vest Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Technology 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Technology has no effect on the direction of American Beacon i.e., American Beacon and FT Vest go up and down completely randomly.

Pair Corralation between American Beacon and FT Vest

Given the investment horizon of 90 days American Beacon Select is expected to generate 1.25 times more return on investment than FT Vest. However, American Beacon is 1.25 times more volatile than FT Vest Technology. It trades about 0.04 of its potential returns per unit of risk. FT Vest Technology is currently generating about -0.07 per unit of risk. If you would invest  2,957  in American Beacon Select on December 28, 2024 and sell it today you would earn a total of  105.00  from holding American Beacon Select or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

American Beacon Select  vs.  FT Vest Technology

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.

FT Vest Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Vest Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with American Beacon and FT Vest

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

The idea behind American Beacon Select and FT Vest Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.