Correlation Between Pace Small/medium and American Beacon
Can any of the company-specific risk be diversified away by investing in both Pace Small/medium 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 Pace Small/medium and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Smallmedium Value and American Beacon Small, you can compare the effects of market volatilities on Pace Small/medium 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 Pace Small/medium with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Small/medium and American Beacon.
Diversification Opportunities for Pace Small/medium and American Beacon
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pace and American is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Value and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small and Pace Small/medium 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 Pace Smallmedium Value 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 Small has no effect on the direction of Pace Small/medium i.e., Pace Small/medium and American Beacon go up and down completely randomly.
Pair Corralation between Pace Small/medium and American Beacon
Assuming the 90 days horizon Pace Smallmedium Value is expected to under-perform the American Beacon. In addition to that, Pace Small/medium is 7.57 times more volatile than American Beacon Small. It trades about -0.19 of its total potential returns per unit of risk. American Beacon Small is currently generating about 0.14 per unit of volatility. If you would invest 2,084 in American Beacon Small on December 2, 2024 and sell it today you would earn a total of 47.00 from holding American Beacon Small or generate 2.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Pace Smallmedium Value vs. American Beacon Small
Performance |
Timeline |
Pace Smallmedium Value |
American Beacon Small |
Pace Small/medium and American Beacon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pace Small/medium and American Beacon
The main advantage of trading using opposite Pace Small/medium and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Small/medium 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.Pace Small/medium vs. Virtus High Yield | Pace Small/medium vs. Dunham High Yield | Pace Small/medium vs. Voya High Yield | Pace Small/medium vs. T Rowe Price |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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