Correlation Between Tax-managed and American Beacon
Can any of the company-specific risk be diversified away by investing in both Tax-managed 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 Tax-managed and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Managed Mid Small and American Beacon Small, you can compare the effects of market volatilities on Tax-managed 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 Tax-managed with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and American Beacon.
Diversification Opportunities for Tax-managed and American Beacon
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tax-managed and American is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small and Tax-managed 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 Tax Managed Mid Small 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 Small has no effect on the direction of Tax-managed i.e., Tax-managed and American Beacon go up and down completely randomly.
Pair Corralation between Tax-managed and American Beacon
Assuming the 90 days horizon Tax-managed is expected to generate 1.02 times less return on investment than American Beacon. But when comparing it to its historical volatility, Tax Managed Mid Small is 1.1 times less risky than American Beacon. It trades about 0.09 of its potential returns per unit of risk. American Beacon Small is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,562 in American Beacon Small on September 1, 2024 and sell it today you would earn a total of 359.00 from holding American Beacon Small or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Tax Managed Mid Small vs. American Beacon Small
Performance |
| Timeline |
| Tax Managed Mid |
| American Beacon Small |
Tax-managed and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-managed and American Beacon
The main advantage of trading using opposite Tax-managed and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed 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.| Tax-managed vs. Hennessy Bp Energy | Tax-managed vs. Gmo Resources | Tax-managed vs. Short Oil Gas | Tax-managed vs. Jennison Natural Resources |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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