Correlation Between Nasdaq and American Beacon

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

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

Diversification Opportunities for Nasdaq and American Beacon

0.57

Correlation Coefficient

Nasdaq  American Beacon

Very weak diversification

The 3 months correlation between Nasdaq and American is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and American Beacon Twentyfour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Twen and Nasdaq 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 Nasdaq Inc 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 Twen has no effect on the direction of Nasdaq i.e., Nasdaq and American Beacon go up and down completely randomly.

Pair Corralation between Nasdaq and American Beacon

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 7.19 times more return on investment than American Beacon. However, Nasdaq is 7.19 times more volatile than American Beacon Twentyfour. It trades about 0.16 of its potential returns per unit of risk. American Beacon Twentyfour is currently generating about 0.08 per unit of risk. If you would invest  7,249  in Nasdaq Inc on September 17, 2024 and sell it today you would earn a total of  763.00  from holding Nasdaq Inc or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Nasdaq Inc  vs.  American Beacon Twentyfour

Nasdaq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Beacon Twen

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Twentyfour are ranked lower than 6 (%) 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 Nasdaq and American Beacon

The main advantage of trading using opposite Nasdaq and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc and American Beacon Twentyfour 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.