Correlation Between American Beacon and Towle Deep
Can any of the company-specific risk be diversified away by investing in both American Beacon and Towle Deep 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 Towle Deep 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 Towle Deep Value, you can compare the effects of market volatilities on American Beacon and Towle Deep 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 Towle Deep. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Towle Deep.
Diversification Opportunities for American Beacon and Towle Deep
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Towle is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Small and Towle Deep Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towle Deep 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 Small are associated (or correlated) with Towle Deep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towle Deep Value has no effect on the direction of American Beacon i.e., American Beacon and Towle Deep go up and down completely randomly.
Pair Corralation between American Beacon and Towle Deep
Assuming the 90 days horizon American Beacon Small is expected to generate 0.88 times more return on investment than Towle Deep. However, American Beacon Small is 1.14 times less risky than Towle Deep. It trades about 0.08 of its potential returns per unit of risk. Towle Deep Value is currently generating about 0.0 per unit of risk. If you would invest 2,581 in American Beacon Small on August 29, 2024 and sell it today you would earn a total of 337.00 from holding American Beacon Small or generate 13.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Small vs. Towle Deep Value
Performance |
| Timeline |
| American Beacon Small |
| Towle Deep Value |
American Beacon and Towle Deep Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Towle Deep
The main advantage of trading using opposite American Beacon and Towle Deep positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Towle Deep 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 Towle Deep will offset losses from the drop in Towle Deep's long position.The idea behind American Beacon Small and Towle Deep Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Towle Deep vs. Vanguard Small Cap Value | Towle Deep vs. Vanguard Small Cap Value | Towle Deep vs. American Beacon 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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