Correlation Between Technology Ultrasector and American Beacon
Can any of the company-specific risk be diversified away by investing in both Technology Ultrasector 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 Technology Ultrasector and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Ultrasector Profund and American Beacon Bridgeway, you can compare the effects of market volatilities on Technology Ultrasector 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 Technology Ultrasector with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Ultrasector and American Beacon.
Diversification Opportunities for Technology Ultrasector and American Beacon
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Technology and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and American Beacon Bridgeway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Bridgeway and Technology Ultrasector 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 Technology Ultrasector Profund 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 Bridgeway has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and American Beacon go up and down completely randomly.
Pair Corralation between Technology Ultrasector and American Beacon
Assuming the 90 days horizon Technology Ultrasector is expected to generate 1.33 times less return on investment than American Beacon. In addition to that, Technology Ultrasector is 1.84 times more volatile than American Beacon Bridgeway. It trades about 0.06 of its total potential returns per unit of risk. American Beacon Bridgeway is currently generating about 0.16 per unit of volatility. If you would invest 3,656 in American Beacon Bridgeway on August 25, 2024 and sell it today you would earn a total of 134.00 from holding American Beacon Bridgeway or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Ultrasector Profund vs. American Beacon Bridgeway
Performance |
| Timeline |
| Technology Ultrasector |
| American Beacon Bridgeway |
Technology Ultrasector and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Ultrasector and American Beacon
The main advantage of trading using opposite Technology Ultrasector and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Ultrasector 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.| Technology Ultrasector vs. Fidelity Stock Selector | Technology Ultrasector vs. Massmutual Select T | Technology Ultrasector vs. Dodge Cox Stock | Technology Ultrasector vs. Touchstone Large Cap |
| American Beacon vs. Victory Integrity Small Cap | American Beacon vs. The Hartford Small | American Beacon vs. Touchstone Small Cap | American Beacon vs. Nationwide Small Cap |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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