Correlation Between Old Westbury and American Beacon
Can any of the company-specific risk be diversified away by investing in both Old Westbury 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 Old Westbury and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Westbury Large and American Beacon Shapiro, you can compare the effects of market volatilities on Old Westbury 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 Old Westbury with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Westbury and American Beacon.
Diversification Opportunities for Old Westbury and American Beacon
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Old and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Large 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 Old Westbury 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 Old Westbury Large 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 Old Westbury i.e., Old Westbury and American Beacon go up and down completely randomly.
Pair Corralation between Old Westbury and American Beacon
Assuming the 90 days horizon Old Westbury is expected to generate 2.52 times less return on investment than American Beacon. But when comparing it to its historical volatility, Old Westbury Large is 1.04 times less risky than American Beacon. It trades about 0.1 of its potential returns per unit of risk. American Beacon Shapiro is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,368 in American Beacon Shapiro on October 25, 2024 and sell it today you would earn a total of 51.00 from holding American Beacon Shapiro or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Westbury Large vs. American Beacon Shapiro
Performance |
| Timeline |
| Old Westbury Large |
| American Beacon Shapiro |
Old Westbury and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Westbury and American Beacon
The main advantage of trading using opposite Old Westbury and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Westbury 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.| Old Westbury vs. Sp Smallcap 600 | Old Westbury vs. Nuveen Small Cap | Old Westbury vs. Needham Small Cap | Old Westbury vs. Buffalo Small Cap |
| American Beacon vs. Tax Managed Mid Small | American Beacon vs. Jhancock Diversified Macro | American Beacon vs. Principal Lifetime Hybrid | American Beacon vs. Vy T Rowe |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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