Correlation Between Wealthbuilder Conservative and American Beacon

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

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

Diversification Opportunities for Wealthbuilder Conservative and American Beacon

0.89

Correlation Coefficient

Wealthbuilder Conservative  American Beacon

Very poor diversification

The 3 months correlation between Wealthbuilder and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wealthbuilder Conservative All and American Beacon Garcia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Garcia and Wealthbuilder Conservative 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 Wealthbuilder Conservative Allocation 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 Garcia has no effect on the direction of Wealthbuilder Conservative i.e., Wealthbuilder Conservative and American Beacon go up and down completely randomly.

Pair Corralation between Wealthbuilder Conservative and American Beacon

Assuming the 90 days horizon Wealthbuilder Conservative Allocation is expected to generate 0.92 times more return on investment than American Beacon. However, Wealthbuilder Conservative Allocation is 1.09 times less risky than American Beacon. It trades about -0.01 of its potential returns per unit of risk. American Beacon Garcia is currently generating about -0.04 per unit of risk. If you would invest  876.00  in Wealthbuilder Conservative Allocation on October 23, 2024 and sell it today you would lose (2.00) from holding Wealthbuilder Conservative Allocation or give up 0.23% of portfolio value over 90 days.

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

Wealthbuilder Conservative All  vs.  American Beacon Garcia

Wealthbuilder Conservative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wealthbuilder Conservative Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Wealthbuilder Conservative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Garcia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Garcia has generated negative risk-adjusted returns adding no value to fund investors. 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 Wealthbuilder Conservative and American Beacon

The main advantage of trading using opposite Wealthbuilder Conservative and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthbuilder Conservative 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 Wealthbuilder Conservative Allocation and American Beacon Garcia 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.