Correlation Between American Beacon and Large Company
Can any of the company-specific risk be diversified away by investing in both American Beacon and Large Company 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 Large Company 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 Large Pany Value, you can compare the effects of market volatilities on American Beacon and Large Company 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 Large Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Large Company.
Diversification Opportunities for American Beacon and Large Company
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Large is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Balanced and Large Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Pany Value 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 Large Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Pany Value has no effect on the direction of American Beacon i.e., American Beacon and Large Company go up and down completely randomly.
Pair Corralation between American Beacon and Large Company
Assuming the 90 days horizon American Beacon is expected to generate 2.55 times less return on investment than Large Company. But when comparing it to its historical volatility, American Beacon Balanced is 1.65 times less risky than Large Company. It trades about 0.2 of its potential returns per unit of risk. Large Pany Value is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,003 in Large Pany Value on November 7, 2024 and sell it today you would earn a total of 49.00 from holding Large Pany Value or generate 4.89% 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. Large Pany Value
Performance |
| Timeline |
| American Beacon Balanced |
| Large Pany Value |
American Beacon and Large Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Large Company
The main advantage of trading using opposite American Beacon and Large Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Large Company 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 Large Company will offset losses from the drop in Large Company's long position.| American Beacon vs. American Beacon International | American Beacon vs. American Beacon Large | American Beacon vs. Calvert Balanced Portfolio | American Beacon vs. Buffalo Flexible Income |
| Large Company vs. Small Pany Fund | Large Company vs. Value Fund Investor | Large Company vs. Small Cap Value | Large Company vs. Real Estate Fund |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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