Correlation Between Palmer Square and American Beacon

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Can any of the company-specific risk be diversified away by investing in both Palmer Square 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 Palmer Square and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palmer Square Ssi and American Beacon Ssi, you can compare the effects of market volatilities on Palmer Square 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 Palmer Square with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palmer Square and American Beacon.

Diversification Opportunities for Palmer Square and American Beacon

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Palmer and American is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ssi and American Beacon Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ssi and Palmer Square 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 Palmer Square Ssi 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 Ssi has no effect on the direction of Palmer Square i.e., Palmer Square and American Beacon go up and down completely randomly.

Pair Corralation between Palmer Square and American Beacon

Assuming the 90 days horizon Palmer Square Ssi is expected to generate about the same return on investment as American Beacon Ssi. But, Palmer Square Ssi is 1.05 times less risky than American Beacon. It trades about 0.23 of its potential returns per unit of risk. American Beacon Ssi is currently generating about 0.22 per unit of risk. If you would invest  992.00  in American Beacon Ssi on September 27, 2024 and sell it today you would earn a total of  9.00  from holding American Beacon Ssi or generate 0.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Palmer Square Ssi  vs.  American Beacon Ssi

 Performance 
       Timeline  
Palmer Square Ssi 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ssi are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
American Beacon Ssi 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ssi are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Palmer Square and American Beacon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Palmer Square and American Beacon

The main advantage of trading using opposite Palmer Square and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palmer Square 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 Palmer Square Ssi and American Beacon Ssi 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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