Correlation Between Pace High and American Beacon
Can any of the company-specific risk be diversified away by investing in both Pace 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 Pace 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 Pace High Yield and American Beacon Garcia, you can compare the effects of market volatilities on Pace 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 Pace High with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace High and American Beacon.
Diversification Opportunities for Pace High and American Beacon
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pace and American is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield and American Beacon Garcia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Garcia and Pace 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 Pace 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 Garcia has no effect on the direction of Pace High i.e., Pace High and American Beacon go up and down completely randomly.
Pair Corralation between Pace High and American Beacon
Assuming the 90 days horizon Pace High is expected to generate 4.15 times less return on investment than American Beacon. But when comparing it to its historical volatility, Pace High Yield is 2.77 times less risky than American Beacon. It trades about 0.06 of its potential returns per unit of risk. American Beacon Garcia is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 854.00 in American Beacon Garcia on August 29, 2024 and sell it today you would earn a total of 8.00 from holding American Beacon Garcia or generate 0.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace High Yield vs. American Beacon Garcia
Performance |
| Timeline |
| Pace High Yield |
| American Beacon Garcia |
Pace High and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace High and American Beacon
The main advantage of trading using opposite Pace High and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace 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.| Pace High vs. Dana Large Cap | Pace High vs. Qs Large Cap | Pace High vs. Qs Large Cap | Pace High vs. Qs Large Cap |
| American Beacon vs. American Century Diversified | American Beacon vs. Jhancock Diversified Macro | American Beacon vs. The Gabelli Small | American Beacon vs. Small Cap Stock |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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