Correlation Between American Beacon and Small Cap
Can any of the company-specific risk be diversified away by investing in both American Beacon and Small Cap 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 American Beacon and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Stephens and Small Cap Growth, you can compare the effects of market volatilities on American Beacon and Small Cap 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 American Beacon with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Small Cap.
Diversification Opportunities for American Beacon and Small Cap
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Small is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Stephens and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and American Beacon 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 American Beacon Stephens are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of American Beacon i.e., American Beacon and Small Cap go up and down completely randomly.
Pair Corralation between American Beacon and Small Cap
Assuming the 90 days horizon American Beacon Stephens is expected to generate 0.98 times more return on investment than Small Cap. However, American Beacon Stephens is 1.02 times less risky than Small Cap. It trades about -0.16 of its potential returns per unit of risk. Small Cap Growth is currently generating about -0.25 per unit of risk. If you would invest 3,961 in American Beacon Stephens on November 28, 2024 and sell it today you would lose (135.00) from holding American Beacon Stephens or give up 3.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Stephens vs. Small Cap Growth
Performance |
| Timeline |
| American Beacon Stephens |
| Small Cap Growth |
American Beacon and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Small Cap
The main advantage of trading using opposite American Beacon and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| American Beacon vs. Voya High Yield | American Beacon vs. Pace High Yield | American Beacon vs. Mainstay High Yield | American Beacon vs. Gmo High Yield |
| Small Cap vs. Investec Global Franchise | Small Cap vs. Morningstar Global Income | Small Cap vs. Barings Global Floating | Small Cap vs. Ab Global Bond |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |