Correlation Between American Beacon and IShares Expanded
Can any of the company-specific risk be diversified away by investing in both American Beacon and IShares Expanded 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 American Beacon and IShares Expanded into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Select and iShares Expanded Tech Software, you can compare the effects of market volatilities on American Beacon and IShares Expanded 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 American Beacon with a short position of IShares Expanded. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and IShares Expanded.
Diversification Opportunities for American Beacon and IShares Expanded
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Select and iShares Expanded Tech Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech and American Beacon 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 American Beacon Select are associated (or correlated) with IShares Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of American Beacon i.e., American Beacon and IShares Expanded go up and down completely randomly.
Pair Corralation between American Beacon and IShares Expanded
Given the investment horizon of 90 days American Beacon is expected to generate 1.97 times less return on investment than IShares Expanded. But when comparing it to its historical volatility, American Beacon Select is 1.32 times less risky than IShares Expanded. It trades about 0.09 of its potential returns per unit of risk. iShares Expanded Tech Software is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 10,359 in iShares Expanded Tech Software on September 12, 2024 and sell it today you would earn a total of 423.00 from holding iShares Expanded Tech Software or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Select vs. iShares Expanded Tech Software
Performance |
| Timeline |
| American Beacon Select |
| iShares Expanded Tech |
American Beacon and IShares Expanded Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and IShares Expanded
The main advantage of trading using opposite American Beacon and IShares Expanded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, IShares Expanded 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 IShares Expanded will offset losses from the drop in IShares Expanded's long position.| American Beacon vs. Columbia Emerging Markets | American Beacon vs. Direxion Daily Homebuilders | American Beacon vs. Direxion Daily Cnsmr | American Beacon vs. Fidelity MSCI Consumer |
| IShares Expanded vs. American Beacon Select | IShares Expanded vs. Columbia Emerging Markets | IShares Expanded vs. Direxion Daily Homebuilders | IShares Expanded vs. Direxion Daily Cnsmr |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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