Correlation Between World Energy and American Beacon
Can any of the company-specific risk be diversified away by investing in both World Energy 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 World Energy and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and American Beacon Funds, you can compare the effects of market volatilities on World Energy 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 World Energy with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and American Beacon.
Diversification Opportunities for World Energy and American Beacon
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between World and American is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and American Beacon Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Funds and World Energy 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 World Energy Fund 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 Funds has no effect on the direction of World Energy i.e., World Energy and American Beacon go up and down completely randomly.
Pair Corralation between World Energy and American Beacon
Assuming the 90 days horizon World Energy Fund is expected to generate 6.94 times more return on investment than American Beacon. However, World Energy is 6.94 times more volatile than American Beacon Funds. It trades about 0.06 of its potential returns per unit of risk. American Beacon Funds is currently generating about 0.23 per unit of risk. If you would invest 1,281 in World Energy Fund on September 14, 2024 and sell it today you would earn a total of 206.00 from holding World Energy Fund or generate 16.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. American Beacon Funds
Performance |
| Timeline |
| World Energy |
| American Beacon Funds |
World Energy and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and American Beacon
The main advantage of trading using opposite World Energy and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy 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.| World Energy vs. Siit Ultra Short | World Energy vs. Alpine Ultra Short | World Energy vs. Franklin Federal Limited Term | World Energy vs. Barings Active Short |
| American Beacon vs. Europac Gold Fund | American Beacon vs. James Balanced Golden | American Beacon vs. Oppenheimer Gold Special | American Beacon vs. Great West Goldman Sachs |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |