Correlation Between Applied Finance and Amer Beacon
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Amer 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 Applied Finance and Amer Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Amer Beacon Ark, you can compare the effects of market volatilities on Applied Finance and Amer 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 Applied Finance with a short position of Amer Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Amer Beacon.
Diversification Opportunities for Applied Finance and Amer Beacon
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Amer is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Amer Beacon Ark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Beacon Ark and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Amer Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Beacon Ark has no effect on the direction of Applied Finance i.e., Applied Finance and Amer Beacon go up and down completely randomly.
Pair Corralation between Applied Finance and Amer Beacon
Assuming the 90 days horizon Applied Finance is expected to generate 2.15 times less return on investment than Amer Beacon. But when comparing it to its historical volatility, Applied Finance Explorer is 1.55 times less risky than Amer Beacon. It trades about 0.05 of its potential returns per unit of risk. Amer Beacon Ark is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 816.00 in Amer Beacon Ark on September 14, 2024 and sell it today you would earn a total of 861.00 from holding Amer Beacon Ark or generate 105.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Amer Beacon Ark
Performance |
| Timeline |
| Applied Finance Explorer |
| Amer Beacon Ark |
Applied Finance and Amer Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Amer Beacon
The main advantage of trading using opposite Applied Finance and Amer Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Amer 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 Amer Beacon will offset losses from the drop in Amer Beacon's long position.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small | Applied Finance vs. Oberweis Small Cap Opportunities |
| Amer Beacon vs. Palm Valley Capital | Amer Beacon vs. Royce Opportunity Fund | Amer Beacon vs. Applied Finance Explorer | Amer Beacon vs. William Blair Small |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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