Correlation Between Boston Trust and American Beacon
Can any of the company-specific risk be diversified away by investing in both Boston Trust 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 Boston Trust and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Trust Midcap and American Beacon Stephens, you can compare the effects of market volatilities on Boston Trust 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 Boston Trust with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and American Beacon.
Diversification Opportunities for Boston Trust and American Beacon
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Boston and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Midcap and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens and Boston Trust 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 Boston Trust Midcap 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 Stephens has no effect on the direction of Boston Trust i.e., Boston Trust and American Beacon go up and down completely randomly.
Pair Corralation between Boston Trust and American Beacon
Assuming the 90 days horizon Boston Trust is expected to generate 1.7 times less return on investment than American Beacon. But when comparing it to its historical volatility, Boston Trust Midcap is 1.27 times less risky than American Beacon. It trades about 0.31 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 3,085 in American Beacon Stephens on August 28, 2024 and sell it today you would earn a total of 304.00 from holding American Beacon Stephens or generate 9.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Trust Midcap vs. American Beacon Stephens
Performance |
| Timeline |
| Boston Trust Midcap |
| American Beacon Stephens |
Boston Trust and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Trust and American Beacon
The main advantage of trading using opposite Boston Trust and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Trust 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.| Boston Trust vs. Boston Trust Asset | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Boston Trust Small |
| American Beacon vs. American Beacon Stephens | American Beacon vs. American Beacon Stephens | American Beacon vs. American Beacon Stephens | American Beacon vs. Baird Midcap 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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