Correlation Between Rainier International and American Beacon
Can any of the company-specific risk be diversified away by investing in both Rainier International 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 Rainier International and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rainier International Discovery and American Beacon Bridgeway, you can compare the effects of market volatilities on Rainier International 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 Rainier International with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rainier International and American Beacon.
Diversification Opportunities for Rainier International and American Beacon
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RAINIER and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Rainier International Discover and American Beacon Bridgeway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Bridgeway and Rainier International 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 Rainier International Discovery 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 Bridgeway has no effect on the direction of Rainier International i.e., Rainier International and American Beacon go up and down completely randomly.
Pair Corralation between Rainier International and American Beacon
Assuming the 90 days horizon Rainier International is expected to generate 3.53 times less return on investment than American Beacon. But when comparing it to its historical volatility, Rainier International Discovery is 1.1 times less risky than American Beacon. It trades about 0.02 of its potential returns per unit of risk. American Beacon Bridgeway is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,316 in American Beacon Bridgeway on September 2, 2024 and sell it today you would earn a total of 540.00 from holding American Beacon Bridgeway or generate 23.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rainier International Discover vs. American Beacon Bridgeway
Performance |
| Timeline |
| Rainier International |
| American Beacon Bridgeway |
Rainier International and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rainier International and American Beacon
The main advantage of trading using opposite Rainier International and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rainier International 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.The idea behind Rainier International Discovery and American Beacon Bridgeway pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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