Correlation Between American Beacon and American Beacon

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

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

Diversification Opportunities for American Beacon and American Beacon

0.91

Correlation Coefficient

American Beacon  American Beacon

Almost no diversification

The 3 months correlation between American and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Balanced 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 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 Balanced 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 American Beacon i.e., American Beacon and American Beacon go up and down completely randomly.

Pair Corralation between American Beacon and American Beacon

Assuming the 90 days horizon American Beacon is expected to generate 5.29 times less return on investment than American Beacon. But when comparing it to its historical volatility, American Beacon Balanced is 3.0 times less risky than American Beacon. It trades about 0.1 of its potential returns per unit of risk. American Beacon Small is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,707  in American Beacon Small on August 12, 2024 and sell it today you would earn a total of  155.00  from holding American Beacon Small or generate 5.73% return on investment over 90 days.

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

American Beacon Balanced  vs.  American Beacon Small

American Beacon Balanced

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Balanced are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in December 2024.

American Beacon Small

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, American Beacon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Beacon and American Beacon

The main advantage of trading using opposite American Beacon and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon 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 American Beacon Balanced and American Beacon Small 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.