Correlation Between American Beacon and Fidelity Low

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

By analyzing existing cross correlation between American Beacon Large and Fidelity Low Priced Stock, you can compare the effects of market volatilities on American Beacon and Fidelity Low 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 Fidelity Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Fidelity Low.

Diversification Opportunities for American Beacon and Fidelity Low

0.57

Correlation Coefficient

American Beacon  Fidelity Low

Very weak diversification

The 3 months correlation between American and Fidelity is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Large and Fidelity Low Priced Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Priced 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 Large are associated (or correlated) with Fidelity Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Priced has no effect on the direction of American Beacon i.e., American Beacon and Fidelity Low go up and down completely randomly.

Pair Corralation between American Beacon and Fidelity Low

Assuming the 90 days horizon American Beacon Large is expected to generate 0.69 times more return on investment than Fidelity Low. However, American Beacon Large is 1.46 times less risky than Fidelity Low. It trades about 0.08 of its potential returns per unit of risk. Fidelity Low Priced Stock is currently generating about -0.04 per unit of risk. If you would invest  2,958  in American Beacon Large on September 14, 2024 and sell it today you would earn a total of  94.00  from holding American Beacon Large or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

American Beacon Large  vs.  Fidelity Low Priced Stock

American Beacon Large

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Large are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Low Priced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Low Priced Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Low 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 Fidelity Low

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

The idea behind American Beacon Large and Fidelity Low Priced Stock 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.