Correlation Between Buffalo Flexible and American Beacon
Can any of the company-specific risk be diversified away by investing in both Buffalo Flexible 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 Buffalo Flexible and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Buffalo Flexible Income and American Beacon Large, you can compare the effects of market volatilities on Buffalo Flexible 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 Buffalo Flexible with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buffalo Flexible and American Beacon.
Diversification Opportunities for Buffalo Flexible and American Beacon
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Buffalo and American is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Buffalo Flexible Income and American Beacon Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Large and Buffalo Flexible 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 Buffalo Flexible Income 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 Large has no effect on the direction of Buffalo Flexible i.e., Buffalo Flexible and American Beacon go up and down completely randomly.
Pair Corralation between Buffalo Flexible and American Beacon
Assuming the 90 days horizon Buffalo Flexible is expected to generate 1.73 times less return on investment than American Beacon. But when comparing it to its historical volatility, Buffalo Flexible Income is 1.34 times less risky than American Beacon. It trades about 0.1 of its potential returns per unit of risk. American Beacon Large is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,432 in American Beacon Large on September 1, 2024 and sell it today you would earn a total of 309.00 from holding American Beacon Large or generate 12.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Buffalo Flexible Income vs. American Beacon Large
Performance |
| Timeline |
| Buffalo Flexible Income |
| American Beacon Large |
Buffalo Flexible and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Buffalo Flexible and American Beacon
The main advantage of trading using opposite Buffalo Flexible and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buffalo Flexible 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.| Buffalo Flexible vs. Villere Balanced Fund | Buffalo Flexible vs. Buffalo High Yield | Buffalo Flexible vs. Buffalo Growth Fund | Buffalo Flexible vs. James Balanced Golden |
| American Beacon vs. Northern Small Cap | American Beacon vs. Ssga International Stock | American Beacon vs. American Beacon International | American Beacon vs. Perkins Mid Cap |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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