Correlation Between Royce Opportunity and American Beacon
Can any of the company-specific risk be diversified away by investing in both Royce Opportunity 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 Royce Opportunity and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royce Opportunity Fund and American Beacon Small, you can compare the effects of market volatilities on Royce Opportunity 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 Royce Opportunity with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Opportunity and American Beacon.
Diversification Opportunities for Royce Opportunity and American Beacon
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Royce and American is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Royce Opportunity Fund 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 Royce Opportunity 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 Royce Opportunity Fund 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 Royce Opportunity i.e., Royce Opportunity and American Beacon go up and down completely randomly.
Pair Corralation between Royce Opportunity and American Beacon
Assuming the 90 days horizon Royce Opportunity Fund is expected to generate 1.1 times more return on investment than American Beacon. However, Royce Opportunity is 1.1 times more volatile than American Beacon Small. It trades about -0.1 of its potential returns per unit of risk. American Beacon Small is currently generating about -0.12 per unit of risk. If you would invest 1,226 in Royce Opportunity Fund on January 12, 2025 and sell it today you would lose (115.00) from holding Royce Opportunity Fund or give up 9.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Royce Opportunity Fund vs. American Beacon Small
Performance |
| Timeline |
| Royce Opportunity |
| American Beacon Small |
Royce Opportunity and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royce Opportunity and American Beacon
The main advantage of trading using opposite Royce Opportunity and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Opportunity 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.| Royce Opportunity vs. Clearbridge Value Trust | Royce Opportunity vs. T Rowe Price | Royce Opportunity vs. Clearbridge International Growth | Royce Opportunity vs. Davis Financial Fund |
| American Beacon vs. Deutsche Health And | American Beacon vs. Fidelity Advisor Health | American Beacon vs. Invesco Global Health | American Beacon vs. Alphacentric Lifesci Healthcare |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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