Correlation Between Federated Government and American Beacon
Can any of the company-specific risk be diversified away by investing in both Federated Government 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 Government 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 Government Ultrashort and American Beacon Large, you can compare the effects of market volatilities on Federated Government 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 Government with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and American Beacon.
Diversification Opportunities for Federated Government and American Beacon
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and American is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and American Beacon Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Large and Federated Government 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 Government Ultrashort 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 Large has no effect on the direction of Federated Government i.e., Federated Government and American Beacon go up and down completely randomly.
Pair Corralation between Federated Government and American Beacon
Assuming the 90 days horizon Federated Government is expected to generate 47.14 times less return on investment than American Beacon. But when comparing it to its historical volatility, Federated Government Ultrashort is 20.25 times less risky than American Beacon. It trades about 0.12 of its potential returns per unit of risk. American Beacon Large is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,997 in American Beacon Large on September 1, 2024 and sell it today you would earn a total of 154.00 from holding American Beacon Large or generate 5.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Government Ultrashor vs. American Beacon Large
Performance |
| Timeline |
| Federated Government |
| American Beacon Large |
Federated Government and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and American Beacon
The main advantage of trading using opposite Federated Government and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government 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 Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
| American Beacon vs. Western Asset Municipal | American Beacon vs. Aam Select Income | American Beacon vs. Materials Portfolio Fidelity | American Beacon vs. Rbb Fund |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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