Correlation Between Mid Cap and American Beacon
Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Growth and American Beacon Stephens, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and American Beacon.
Diversification Opportunities for Mid Cap and American Beacon
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth 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 Mid Cap 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 Mid Cap Growth 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 Mid Cap i.e., Mid Cap and American Beacon go up and down completely randomly.
Pair Corralation between Mid Cap and American Beacon
Assuming the 90 days horizon Mid Cap Growth is expected to generate 1.76 times more return on investment than American Beacon. However, Mid Cap is 1.76 times more volatile than American Beacon Stephens. It trades about 0.52 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.32 per unit of risk. If you would invest 1,235 in Mid Cap Growth on August 26, 2024 and sell it today you would earn a total of 300.00 from holding Mid Cap Growth or generate 24.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth vs. American Beacon Stephens
Performance |
| Timeline |
| Mid Cap Growth |
| American Beacon Stephens |
Mid Cap and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and American Beacon
The main advantage of trading using opposite Mid Cap and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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.| Mid Cap vs. Morgan Stanley Multi | Mid Cap vs. Growth Portfolio Class | Mid Cap vs. Small Pany Growth | Mid Cap vs. Blackrock Science Technology |
| American Beacon vs. Ridgeworth Innovative Growth | American Beacon vs. Mid Cap Growth | American Beacon vs. Small Pany Growth | American Beacon vs. Morgan Stanley Multi |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |