Correlation Between Small-cap Value and American Beacon
Can any of the company-specific risk be diversified away by investing in both Small-cap Value 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 Small-cap Value and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Fund and American Beacon Bridgeway, you can compare the effects of market volatilities on Small-cap Value 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 Small-cap Value with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and American Beacon.
Diversification Opportunities for Small-cap Value and American Beacon
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small-cap and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and American Beacon Bridgeway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Bridgeway and Small-cap Value 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 Small Cap Value 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 Bridgeway has no effect on the direction of Small-cap Value i.e., Small-cap Value and American Beacon go up and down completely randomly.
Pair Corralation between Small-cap Value and American Beacon
Assuming the 90 days horizon Small Cap Value Fund is expected to generate 0.82 times more return on investment than American Beacon. However, Small Cap Value Fund is 1.22 times less risky than American Beacon. It trades about -0.03 of its potential returns per unit of risk. American Beacon Bridgeway is currently generating about -0.09 per unit of risk. If you would invest 3,977 in Small Cap Value Fund on October 26, 2024 and sell it today you would lose (153.00) from holding Small Cap Value Fund or give up 3.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Fund vs. American Beacon Bridgeway
Performance |
| Timeline |
| Small Cap Value |
| American Beacon Bridgeway |
Small-cap Value and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and American Beacon
The main advantage of trading using opposite Small-cap Value and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value 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.| Small-cap Value vs. Rbb Fund | Small-cap Value vs. Rational Dividend Capture | Small-cap Value vs. Growth Fund Of | Small-cap Value vs. T Rowe Price |
| American Beacon vs. American Beacon Bridgeway | American Beacon vs. Small Cap Value Fund | American Beacon vs. Ultra Small Pany Market | American Beacon vs. Ultra Small Pany Fund |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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