Correlation Between NYSE Composite and American Beacon
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and American Beacon Balanced, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and American Beacon.
Diversification Opportunities for NYSE Composite and American Beacon
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between NYSE and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and American Beacon Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Balanced and NYSE Composite 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 NYSE Composite 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 Balanced has no effect on the direction of NYSE Composite i.e., NYSE Composite and American Beacon go up and down completely randomly.
Pair Corralation between NYSE Composite and American Beacon
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.4 times more return on investment than American Beacon. However, NYSE Composite is 1.4 times more volatile than American Beacon Balanced. It trades about 0.13 of its potential returns per unit of risk. American Beacon Balanced is currently generating about 0.15 per unit of risk. If you would invest 1,808,369 in NYSE Composite on August 29, 2024 and sell it today you would earn a total of 212,613 from holding NYSE Composite or generate 11.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. American Beacon Balanced
Performance |
| Timeline |
NYSE Composite and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
American Beacon Balanced
Pair trading matchups for American Beacon
Pair Trading with NYSE Composite and American Beacon
The main advantage of trading using opposite NYSE Composite and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
| American Beacon vs. American Beacon International | American Beacon vs. American Beacon Large | American Beacon vs. American Beacon Small | American Beacon vs. Dreyfus Opportunistic Midcap |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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