Correlation Between Pabrai Wagons and American Beacon

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

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

Diversification Opportunities for Pabrai Wagons and American Beacon

0.79

Correlation Coefficient

Pabrai Wagons  American Beacon

Poor diversification

The 3 months correlation between Pabrai and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pabrai Wagons Institutional and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens and Pabrai Wagons 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 Pabrai Wagons Institutional 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 Stephens has no effect on the direction of Pabrai Wagons i.e., Pabrai Wagons and American Beacon go up and down completely randomly.

Pair Corralation between Pabrai Wagons and American Beacon

Assuming the 90 days horizon Pabrai Wagons Institutional is expected to under-perform the American Beacon. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pabrai Wagons Institutional is 1.03 times less risky than American Beacon. The mutual fund trades about -0.29 of its potential returns per unit of risk. The American Beacon Stephens is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,889  in American Beacon Stephens on December 22, 2024 and sell it today you would lose (244.00) from holding American Beacon Stephens or give up 6.27% of portfolio value over 90 days.

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

Pabrai Wagons Institutional  vs.  American Beacon Stephens

Pabrai Wagons Instit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pabrai Wagons Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

American Beacon Stephens

Risk-Adjusted Performance

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 latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pabrai Wagons and American Beacon

The main advantage of trading using opposite Pabrai Wagons and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pabrai Wagons 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 Pabrai Wagons Institutional and American Beacon Stephens 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.