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 Shapiro, 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
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and American Beacon Shapiro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Shapiro 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 Shapiro 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 1.13 times less return on investment than American Beacon. But when comparing it to its historical volatility, NYSE Composite is 1.55 times less risky than American Beacon. It trades about 0.42 of its potential returns per unit of risk. American Beacon Shapiro is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,109 in American Beacon Shapiro on September 1, 2024 and sell it today you would earn a total of 70.00 from holding American Beacon Shapiro or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
NYSE Composite vs. American Beacon Shapiro
Performance |
| Timeline |
NYSE Composite and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
American Beacon Shapiro
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. Acumen Pharmaceuticals | NYSE Composite vs. Mind Medicine | NYSE Composite vs. NL Industries | NYSE Composite vs. Ecovyst |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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