Correlation Between WisdomTree Trust and American Beacon

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

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

Diversification Opportunities for WisdomTree Trust and American Beacon

-0.58

Correlation Coefficient

WisdomTree Trust  American Beacon

Excellent diversification

The 3 months correlation between WisdomTree and American is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Trust and American Beacon Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Select and WisdomTree Trust 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 WisdomTree Trust 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 Select has no effect on the direction of WisdomTree Trust i.e., WisdomTree Trust and American Beacon go up and down completely randomly.

Pair Corralation between WisdomTree Trust and American Beacon

Given the investment horizon of 90 days WisdomTree Trust is expected to under-perform the American Beacon. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Trust is 1.05 times less risky than American Beacon. The etf trades about -0.1 of its potential returns per unit of risk. The American Beacon Select is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,890  in American Beacon Select on September 16, 2025 and sell it today you would earn a total of  507.00  from holding American Beacon Select or generate 13.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

WisdomTree Trust  vs.  American Beacon Select

WisdomTree Trust

Risk-Adjusted Performance

Weakest

Over the last 90 days WisdomTree Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

American Beacon Select

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Select are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, American Beacon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Trust and American Beacon

The main advantage of trading using opposite WisdomTree Trust and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Trust 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 WisdomTree Trust and American Beacon Select 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 Transaction History module to view history of all your transactions and understand their impact on performance.