Correlation Between American Beacon and Palmer Square

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

By analyzing existing cross correlation between American Beacon Stephens and Palmer Square Ssi, you can compare the effects of market volatilities on American Beacon and Palmer Square 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 Palmer Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Palmer Square.

Diversification Opportunities for American Beacon and Palmer Square

0.54

Correlation Coefficient

American Beacon  Palmer Square

Very weak diversification

The 3 months correlation between American and Palmer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Stephens and Palmer Square Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Ssi 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 Stephens are associated (or correlated) with Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Ssi has no effect on the direction of American Beacon i.e., American Beacon and Palmer Square go up and down completely randomly.

Pair Corralation between American Beacon and Palmer Square

Assuming the 90 days horizon American Beacon Stephens is expected to under-perform the Palmer Square. In addition to that, American Beacon is 12.43 times more volatile than Palmer Square Ssi. It trades about -0.02 of its total potential returns per unit of risk. Palmer Square Ssi is currently generating about 0.24 per unit of volatility. If you would invest  986.00  in Palmer Square Ssi on October 15, 2024 and sell it today you would earn a total of  12.00  from holding Palmer Square Ssi or generate 1.22% return on investment over 90 days.

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

American Beacon Stephens  vs.  Palmer Square Ssi

American Beacon Stephens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Stephens has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward 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 Ssi

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ssi are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Beacon and Palmer Square

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

The idea behind American Beacon Stephens and Palmer Square 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.