Correlation Between American Beacon and Old Westbury
Can any of the company-specific risk be diversified away by investing in both American Beacon and Old Westbury 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 Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Shapiro and Old Westbury Municipal, you can compare the effects of market volatilities on American Beacon and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Old Westbury.
Diversification Opportunities for American Beacon and Old Westbury
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Old is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Shapiro and Old Westbury Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Municipal 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 Shapiro are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Municipal has no effect on the direction of American Beacon i.e., American Beacon and Old Westbury go up and down completely randomly.
Pair Corralation between American Beacon and Old Westbury
Assuming the 90 days horizon American Beacon Shapiro is expected to generate 5.35 times more return on investment than Old Westbury. However, American Beacon is 5.35 times more volatile than Old Westbury Municipal. It trades about 0.05 of its potential returns per unit of risk. Old Westbury Municipal is currently generating about -0.01 per unit of risk. If you would invest 1,335 in American Beacon Shapiro on November 3, 2024 and sell it today you would earn a total of 74.00 from holding American Beacon Shapiro or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Shapiro vs. Old Westbury Municipal
Performance |
| Timeline |
| American Beacon Shapiro |
| Old Westbury Municipal |
American Beacon and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Old Westbury
The main advantage of trading using opposite American Beacon and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| American Beacon vs. Alphacentric Lifesci Healthcare | American Beacon vs. Highland Longshort Healthcare | American Beacon vs. Invesco Global Health | American Beacon vs. The Gabelli Healthcare |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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