Correlation Between California Bond and American Beacon
Can any of the company-specific risk be diversified away by investing in both California Bond 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 California Bond and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and American Beacon Shapiro, you can compare the effects of market volatilities on California Bond 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 California Bond with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and American Beacon.
Diversification Opportunities for California Bond and American Beacon
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between California and American is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and American Beacon Shapiro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Shapiro and California Bond 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 California Bond 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 Shapiro has no effect on the direction of California Bond i.e., California Bond and American Beacon go up and down completely randomly.
Pair Corralation between California Bond and American Beacon
Assuming the 90 days horizon California Bond Fund is expected to generate 0.43 times more return on investment than American Beacon. However, California Bond Fund is 2.35 times less risky than American Beacon. It trades about 0.06 of its potential returns per unit of risk. American Beacon Shapiro is currently generating about 0.0 per unit of risk. If you would invest 1,042 in California Bond Fund on September 13, 2024 and sell it today you would earn a total of 9.00 from holding California Bond Fund or generate 0.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
California Bond Fund vs. American Beacon Shapiro
Performance |
| Timeline |
| California Bond |
| American Beacon Shapiro |
California Bond and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and American Beacon
The main advantage of trading using opposite California Bond and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond 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.| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Victory Diversified Stock | California Bond vs. Intermediate Term Bond Fund |
| American Beacon vs. American Beacon Ssi | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Twentyfour |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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