Correlation Between American Beacon and Transamerica Cleartrack
Can any of the company-specific risk be diversified away by investing in both American Beacon and Transamerica Cleartrack 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 Transamerica Cleartrack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Bridgeway and Transamerica Cleartrack Retirement, you can compare the effects of market volatilities on American Beacon and Transamerica Cleartrack 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 Transamerica Cleartrack. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Transamerica Cleartrack.
Diversification Opportunities for American Beacon and Transamerica Cleartrack
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Transamerica is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Bridgeway and Transamerica Cleartrack Retire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Cleartrack 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 Bridgeway are associated (or correlated) with Transamerica Cleartrack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Cleartrack has no effect on the direction of American Beacon i.e., American Beacon and Transamerica Cleartrack go up and down completely randomly.
Pair Corralation between American Beacon and Transamerica Cleartrack
Assuming the 90 days horizon American Beacon Bridgeway is expected to generate 3.09 times more return on investment than Transamerica Cleartrack. However, American Beacon is 3.09 times more volatile than Transamerica Cleartrack Retirement. It trades about 0.32 of its potential returns per unit of risk. Transamerica Cleartrack Retirement is currently generating about 0.37 per unit of risk. If you would invest 2,695 in American Beacon Bridgeway on September 1, 2024 and sell it today you would earn a total of 194.00 from holding American Beacon Bridgeway or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Beacon Bridgeway vs. Transamerica Cleartrack Retire
Performance |
| Timeline |
| American Beacon Bridgeway |
| Transamerica Cleartrack |
American Beacon and Transamerica Cleartrack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Transamerica Cleartrack
The main advantage of trading using opposite American Beacon and Transamerica Cleartrack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Transamerica Cleartrack 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 Transamerica Cleartrack will offset losses from the drop in Transamerica Cleartrack's long position.| American Beacon vs. American Beacon Ssi | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Twentyfour |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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