Correlation Between Dow Jones and American Beacon
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and American Beacon Stephens, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and American Beacon.
Diversification Opportunities for Dow Jones and American Beacon
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and American Beacon go up and down completely randomly.
Pair Corralation between Dow Jones and American Beacon
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.19 times less return on investment than American Beacon. But when comparing it to its historical volatility, Dow Jones Industrial is 1.55 times less risky than American Beacon. It trades about 0.11 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,215 in American Beacon Stephens on August 30, 2024 and sell it today you would earn a total of 472.00 from holding American Beacon Stephens or generate 38.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. American Beacon Stephens
Performance |
| Timeline |
Dow Jones and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
American Beacon Stephens
Pair trading matchups for American Beacon
Pair Trading with Dow Jones and American Beacon
The main advantage of trading using opposite Dow Jones and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| American Beacon vs. Ab Select Longshort | American Beacon vs. Calvert Short Duration | American Beacon vs. Maryland Short Term Tax Free | American Beacon vs. Aqr Long Short Equity |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |