Correlation Between Chestnut Street and Amer Beacon
Can any of the company-specific risk be diversified away by investing in both Chestnut Street and Amer 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 Chestnut Street and Amer Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chestnut Street Exchange and Amer Beacon Garcia, you can compare the effects of market volatilities on Chestnut Street and Amer 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 Chestnut Street with a short position of Amer Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and Amer Beacon.
Diversification Opportunities for Chestnut Street and Amer Beacon
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chestnut and Amer is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Amer Beacon Garcia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Beacon Garcia and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Amer Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Beacon Garcia has no effect on the direction of Chestnut Street i.e., Chestnut Street and Amer Beacon go up and down completely randomly.
Pair Corralation between Chestnut Street and Amer Beacon
Assuming the 90 days horizon Chestnut Street Exchange is expected to generate 1.58 times more return on investment than Amer Beacon. However, Chestnut Street is 1.58 times more volatile than Amer Beacon Garcia. It trades about 0.41 of its potential returns per unit of risk. Amer Beacon Garcia is currently generating about 0.06 per unit of risk. If you would invest 112,550 in Chestnut Street Exchange on November 5, 2024 and sell it today you would earn a total of 5,805 from holding Chestnut Street Exchange or generate 5.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chestnut Street Exchange vs. Amer Beacon Garcia
Performance |
| Timeline |
| Chestnut Street Exchange |
| Amer Beacon Garcia |
Chestnut Street and Amer Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chestnut Street and Amer Beacon
The main advantage of trading using opposite Chestnut Street and Amer Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chestnut Street position performs unexpectedly, Amer 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 Amer Beacon will offset losses from the drop in Amer Beacon's long position.| Chestnut Street vs. Ab Bond Inflation | Chestnut Street vs. Ab Bond Inflation | Chestnut Street vs. Ab Bond Inflation | Chestnut Street vs. Lord Abbett Inflation |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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