Correlation Between Columbia Convertible and American Beacon

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

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

Diversification Opportunities for Columbia Convertible and American Beacon

0.5

Correlation Coefficient

Columbia Convertible  American Beacon

Very weak diversification

The 3 months correlation between Columbia and American is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Convertible Securitie 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 Columbia Convertible 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 Columbia Convertible Securities 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 Columbia Convertible i.e., Columbia Convertible and American Beacon go up and down completely randomly.

Pair Corralation between Columbia Convertible and American Beacon

Assuming the 90 days horizon Columbia Convertible Securities is expected to generate 0.62 times more return on investment than American Beacon. However, Columbia Convertible Securities is 1.6 times less risky than American Beacon. It trades about -0.19 of its potential returns per unit of risk. American Beacon Stephens is currently generating about -0.33 per unit of risk. If you would invest  2,281  in Columbia Convertible Securities on October 7, 2024 and sell it today you would lose (65.00) from holding Columbia Convertible Securities or give up 2.85% of portfolio value over 90 days.

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

Columbia Convertible Securitie  vs.  American Beacon Stephens

Columbia Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Convertible Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Beacon Stephens

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Stephens are ranked lower than 3 (%) 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 Columbia Convertible and American Beacon

The main advantage of trading using opposite Columbia Convertible and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Convertible 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 Columbia Convertible Securities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.