Correlation Between Morningstar Aggressive and American Beacon
Can any of the company-specific risk be diversified away by investing in both Morningstar Aggressive 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 Morningstar Aggressive and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Aggressive Growth and American Beacon International, you can compare the effects of market volatilities on Morningstar Aggressive 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 Morningstar Aggressive with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Aggressive and American Beacon.
Diversification Opportunities for Morningstar Aggressive and American Beacon
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Morningstar and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Aggressive Growth and American Beacon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Inte and Morningstar Aggressive 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 Morningstar Aggressive Growth 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 Inte has no effect on the direction of Morningstar Aggressive i.e., Morningstar Aggressive and American Beacon go up and down completely randomly.
Pair Corralation between Morningstar Aggressive and American Beacon
Assuming the 90 days horizon Morningstar Aggressive Growth is expected to generate 0.79 times more return on investment than American Beacon. However, Morningstar Aggressive Growth is 1.27 times less risky than American Beacon. It trades about 0.13 of its potential returns per unit of risk. American Beacon International is currently generating about -0.25 per unit of risk. If you would invest 1,592 in Morningstar Aggressive Growth on August 29, 2024 and sell it today you would earn a total of 31.00 from holding Morningstar Aggressive Growth or generate 1.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morningstar Aggressive Growth vs. American Beacon International
Performance |
| Timeline |
| Morningstar Aggressive |
| American Beacon Inte |
Morningstar Aggressive and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Aggressive and American Beacon
The main advantage of trading using opposite Morningstar Aggressive and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Aggressive 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.| Morningstar Aggressive vs. Ab Small Cap | Morningstar Aggressive vs. Small Cap Growth | Morningstar Aggressive vs. Us Small Cap | Morningstar Aggressive vs. Ab Small Cap |
| American Beacon vs. Pace High Yield | American Beacon vs. Morningstar Aggressive Growth | American Beacon vs. Vanguard High Yield Tax Exempt | American Beacon vs. Strategic Allocation Aggressive |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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