Correlation Between American Beacon and Wasatch E

Can any of the company-specific risk be diversified away by investing in both American Beacon and Wasatch E 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 Wasatch E into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Beacon International and Wasatch E Growth, you can compare the effects of market volatilities on American Beacon and Wasatch E 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 Wasatch E. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Wasatch E.

Diversification Opportunities for American Beacon and Wasatch E

0.53

Correlation Coefficient

American Beacon  Wasatch E

Very weak diversification

The 3 months correlation between American and Wasatch is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon International and Wasatch E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch E Growth 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 International are associated (or correlated) with Wasatch E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch E Growth has no effect on the direction of American Beacon i.e., American Beacon and Wasatch E go up and down completely randomly.

Pair Corralation between American Beacon and Wasatch E

Assuming the 90 days horizon American Beacon International is expected to generate 0.76 times more return on investment than Wasatch E. However, American Beacon International is 1.31 times less risky than Wasatch E. It trades about -0.14 of its potential returns per unit of risk. Wasatch E Growth is currently generating about -0.27 per unit of risk. If you would invest  2,010  in American Beacon International on February 1, 2024 and sell it today you would lose (48.00) from holding American Beacon International or give up 2.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

American Beacon International  vs.  Wasatch E Growth

American Beacon Inte

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon International are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch E Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch E Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wasatch E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Beacon and Wasatch E

The main advantage of trading using opposite American Beacon and Wasatch E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Wasatch E 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 Wasatch E will offset losses from the drop in Wasatch E's long position.

The idea behind American Beacon International and Wasatch E Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.