Correlation Between Multi-manager High and American Beacon
Can any of the company-specific risk be diversified away by investing in both Multi-manager High 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 Multi-manager High and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multi Manager High Yield and American Beacon Stephens, you can compare the effects of market volatilities on Multi-manager High 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 Multi-manager High with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-manager High and American Beacon.
Diversification Opportunities for Multi-manager High and American Beacon
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MULTI-MANAGER and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager High Yield 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 Multi-manager High 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 Multi Manager High Yield 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 Multi-manager High i.e., Multi-manager High and American Beacon go up and down completely randomly.
Pair Corralation between Multi-manager High and American Beacon
Assuming the 90 days horizon Multi-manager High is expected to generate 1.58 times less return on investment than American Beacon. But when comparing it to its historical volatility, Multi Manager High Yield is 5.01 times less risky than American Beacon. It trades about 0.15 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,327 in American Beacon Stephens on August 30, 2024 and sell it today you would earn a total of 360.00 from holding American Beacon Stephens or generate 27.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multi Manager High Yield vs. American Beacon Stephens
Performance |
| Timeline |
| Multi Manager High |
| American Beacon Stephens |
Multi-manager High and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multi-manager High and American Beacon
The main advantage of trading using opposite Multi-manager High and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi-manager High 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.| Multi-manager High vs. Upright Assets Allocation | Multi-manager High vs. Pace Large Growth | Multi-manager High vs. Dodge Cox Stock | Multi-manager High vs. Vanguard Equity Income |
| American Beacon vs. Ab Select Longshort | American Beacon vs. Calvert Short Duration | American Beacon vs. Maryland Short Term Tax Free | American Beacon vs. Aqr Long Short Equity |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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