Correlation Between Oil Gas and American Beacon
Can any of the company-specific risk be diversified away by investing in both Oil Gas 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 Oil Gas and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Gas Ultrasector and American Beacon Funds, you can compare the effects of market volatilities on Oil Gas 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 Oil Gas with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and American Beacon.
Diversification Opportunities for Oil Gas and American Beacon
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Oil and American is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and American Beacon Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Funds and Oil Gas 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 Oil Gas Ultrasector 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 Funds has no effect on the direction of Oil Gas i.e., Oil Gas and American Beacon go up and down completely randomly.
Pair Corralation between Oil Gas and American Beacon
Assuming the 90 days horizon Oil Gas Ultrasector is expected to generate about the same return on investment as American Beacon Funds. However, Oil Gas is 10.15 times more volatile than American Beacon Funds. It trades about 0.02 of its potential returns per unit of risk. American Beacon Funds is currently producing about 0.23 per unit of risk. If you would invest 787.00 in American Beacon Funds on September 14, 2024 and sell it today you would earn a total of 75.00 from holding American Beacon Funds or generate 9.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Gas Ultrasector vs. American Beacon Funds
Performance |
| Timeline |
| Oil Gas Ultrasector |
| American Beacon Funds |
Oil Gas and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil Gas and American Beacon
The main advantage of trading using opposite Oil Gas and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas 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.| Oil Gas vs. Oil Gas Ultrasector | Oil Gas vs. Ultramid Cap Profund Ultramid Cap | Oil Gas vs. Precious Metals Ultrasector | Oil Gas vs. Real Estate Ultrasector |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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