Correlation Between Federated Equity and American Beacon
Can any of the company-specific risk be diversified away by investing in both Federated Equity 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 Federated Equity and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Equity Income and American Beacon Garcia, you can compare the effects of market volatilities on Federated Equity 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 Federated Equity with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Equity and American Beacon.
Diversification Opportunities for Federated Equity and American Beacon
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Federated and American is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Federated Equity Income and American Beacon Garcia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Garcia and Federated Equity 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 Federated Equity 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 Garcia has no effect on the direction of Federated Equity i.e., Federated Equity and American Beacon go up and down completely randomly.
Pair Corralation between Federated Equity and American Beacon
Assuming the 90 days horizon Federated Equity Income is expected to generate 1.86 times more return on investment than American Beacon. However, Federated Equity is 1.86 times more volatile than American Beacon Garcia. It trades about 0.22 of its potential returns per unit of risk. American Beacon Garcia is currently generating about 0.08 per unit of risk. If you would invest 2,549 in Federated Equity Income on August 30, 2024 and sell it today you would earn a total of 106.00 from holding Federated Equity Income or generate 4.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Equity Income vs. American Beacon Garcia
Performance |
| Timeline |
| Federated Equity Income |
| American Beacon Garcia |
Federated Equity and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Equity and American Beacon
The main advantage of trading using opposite Federated Equity and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Equity 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.| Federated Equity vs. Federated Emerging Market | Federated Equity vs. Federated Mdt All | Federated Equity vs. Federated Mdt Balanced | Federated Equity vs. Federated Global Allocation |
| American Beacon vs. Artisan High Income | American Beacon vs. Nebraska Municipal Fund | American Beacon vs. Touchstone Ohio Tax | American Beacon vs. Prudential Jennison Financial |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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