Correlation Between Nasdaq-100(r) and American Beacon
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) 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 Nasdaq-100(r) and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and American Beacon Ark, you can compare the effects of market volatilities on Nasdaq-100(r) 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 Nasdaq-100(r) with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and American Beacon.
Diversification Opportunities for Nasdaq-100(r) and American Beacon
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq-100(r) and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and American Beacon Ark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ark and Nasdaq-100(r) 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 Nasdaq 100 2x Strategy 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 Ark has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and American Beacon go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and American Beacon
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to under-perform the American Beacon. In addition to that, Nasdaq-100(r) is 1.24 times more volatile than American Beacon Ark. It trades about -0.16 of its total potential returns per unit of risk. American Beacon Ark is currently generating about -0.09 per unit of volatility. If you would invest 1,678 in American Beacon Ark on October 7, 2024 and sell it today you would lose (82.00) from holding American Beacon Ark or give up 4.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. American Beacon Ark
Performance |
| Timeline |
| Nasdaq 100 2x |
| American Beacon Ark |
Nasdaq-100(r) and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and American Beacon
The main advantage of trading using opposite Nasdaq-100(r) and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) 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.| Nasdaq-100(r) vs. Altegris Futures Evolution | Nasdaq-100(r) vs. Fidelity Sai Inflationfocused | Nasdaq-100(r) vs. Guggenheim Managed Futures | Nasdaq-100(r) vs. Transamerica Inflation Opportunities |
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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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