Correlation Between Extended Market and American Beacon
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and American Beacon Bridgeway, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and American Beacon.
Diversification Opportunities for Extended Market and American Beacon
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Extended and American is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index 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 Extended Market 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 Extended Market Index 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 Extended Market i.e., Extended Market and American Beacon go up and down completely randomly.
Pair Corralation between Extended Market and American Beacon
Assuming the 90 days horizon Extended Market Index is expected to generate 1.27 times more return on investment than American Beacon. However, Extended Market is 1.27 times more volatile than American Beacon Bridgeway. It trades about 0.27 of its potential returns per unit of risk. American Beacon Bridgeway is currently generating about 0.26 per unit of risk. If you would invest 2,325 in Extended Market Index on August 30, 2024 and sell it today you would earn a total of 188.00 from holding Extended Market Index or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. American Beacon Bridgeway
Performance |
| Timeline |
| Extended Market Index |
| American Beacon Bridgeway |
Extended Market and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and American Beacon
The main advantage of trading using opposite Extended Market and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Queens Road Small | Extended Market vs. Boston Partners Small | Extended Market vs. Hennessy Nerstone Mid | Extended Market vs. Lord Abbett Small |
| American Beacon vs. Vanguard High Yield Tax Exempt | American Beacon vs. Rbc Ultra Short Fixed | American Beacon vs. Blrc Sgy Mnp | American Beacon vs. Dreyfusstandish Global Fixed |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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