Correlation Between American Beacon and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both American Beacon and Nasdaq-100(r) 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 Nasdaq-100(r) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Small and Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on American Beacon and Nasdaq-100(r) 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 Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Nasdaq-100(r).
Diversification Opportunities for American Beacon and Nasdaq-100(r)
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Nasdaq-100(r) is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Small and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x 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 Small are associated (or correlated) with Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of American Beacon i.e., American Beacon and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between American Beacon and Nasdaq-100(r)
Assuming the 90 days horizon American Beacon is expected to generate 1.67 times less return on investment than Nasdaq-100(r). But when comparing it to its historical volatility, American Beacon Small is 1.88 times less risky than Nasdaq-100(r). It trades about 0.08 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 48,171 in Nasdaq 100 2x Strategy on September 1, 2024 and sell it today you would earn a total of 9,890 from holding Nasdaq 100 2x Strategy or generate 20.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
American Beacon Small vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| American Beacon Small |
| Nasdaq 100 2x |
American Beacon and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Nasdaq-100(r)
The main advantage of trading using opposite American Beacon and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.| American Beacon vs. T Rowe Price | American Beacon vs. Aim Investment Secs | American Beacon vs. Dws Government Money | American Beacon vs. Franklin Government Money |
| Nasdaq-100(r) vs. Nasdaq 100 2x Strategy | Nasdaq-100(r) vs. Direxion Monthly Nasdaq 100 | Nasdaq-100(r) vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Nasdaq-100(r) vs. Nasdaq 100 2x Strategy |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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