Correlation Between American Beacon and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both American Beacon and Invesco DWA 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 Invesco DWA 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 Invesco DWA Basic, you can compare the effects of market volatilities on American Beacon and Invesco DWA 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 Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Invesco DWA.
Diversification Opportunities for American Beacon and Invesco DWA
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Select and Invesco DWA Basic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Basic 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Basic has no effect on the direction of American Beacon i.e., American Beacon and Invesco DWA go up and down completely randomly.
Pair Corralation between American Beacon and Invesco DWA
Given the investment horizon of 90 days American Beacon Select is expected to generate 1.05 times more return on investment than Invesco DWA. However, American Beacon is 1.05 times more volatile than Invesco DWA Basic. It trades about -0.06 of its potential returns per unit of risk. Invesco DWA Basic is currently generating about -0.11 per unit of risk. If you would invest 3,266 in American Beacon Select on October 22, 2024 and sell it today you would lose (89.00) from holding American Beacon Select or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Select vs. Invesco DWA Basic
Performance |
| Timeline |
| American Beacon Select |
| Invesco DWA Basic |
American Beacon and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Invesco DWA
The main advantage of trading using opposite American Beacon and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Invesco DWA 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 Invesco DWA will offset losses from the drop in Invesco DWA's long position.| American Beacon vs. Ultimus Managers Trust | American Beacon vs. Direxion Daily Regional | American Beacon vs. Direxion Daily SP | American Beacon vs. EA Series Trust |
| Invesco DWA vs. Ultimus Managers Trust | Invesco DWA vs. American Beacon Select | Invesco DWA vs. Direxion Daily Regional | Invesco DWA vs. Direxion Daily SP |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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