Correlation Between American Beacon and Africa Israel
Can any of the company-specific risk be diversified away by investing in both American Beacon and Africa Israel 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 Africa Israel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Small and Africa Israel Residences, you can compare the effects of market volatilities on American Beacon and Africa Israel 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 Africa Israel. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Africa Israel.
Diversification Opportunities for American Beacon and Africa Israel
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Africa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Small and Africa Israel Residences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Israel Residences 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 Small are associated (or correlated) with Africa Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Israel Residences has no effect on the direction of American Beacon i.e., American Beacon and Africa Israel go up and down completely randomly.
Pair Corralation between American Beacon and Africa Israel
Assuming the 90 days horizon American Beacon Small is expected to generate 0.45 times more return on investment than Africa Israel. However, American Beacon Small is 2.23 times less risky than Africa Israel. It trades about -0.04 of its potential returns per unit of risk. Africa Israel Residences is currently generating about -0.23 per unit of risk. If you would invest 2,528 in American Beacon Small on January 26, 2024 and sell it today you would lose (27.00) from holding American Beacon Small or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 76.19% |
| Values | Daily Returns |
American Beacon Small vs. Africa Israel Residences
Performance |
| Timeline |
| American Beacon Small |
| Africa Israel Residences |
American Beacon and Africa Israel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Africa Israel
The main advantage of trading using opposite American Beacon and Africa Israel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Africa Israel 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 Africa Israel will offset losses from the drop in Africa Israel's long position.| American Beacon vs. American Beacon International | American Beacon vs. American Beacon Large | American Beacon vs. Fidelity Low Priced Stock | American Beacon vs. Europacific Growth Fund |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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