Correlation Between American Beacon and Tocqueville International

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

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

Diversification Opportunities for American Beacon and Tocqueville International

-0.48

Correlation Coefficient

American Beacon  Tocqueville International

Very good diversification

The 3 months correlation between American and Tocqueville is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Bridgeway and The Tocqueville International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tocqueville International 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 Bridgeway are associated (or correlated) with Tocqueville International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tocqueville International has no effect on the direction of American Beacon i.e., American Beacon and Tocqueville International go up and down completely randomly.

Pair Corralation between American Beacon and Tocqueville International

Assuming the 90 days horizon American Beacon Bridgeway is expected to generate 1.14 times more return on investment than Tocqueville International. However, American Beacon is 1.14 times more volatile than The Tocqueville International. It trades about 0.11 of its potential returns per unit of risk. The Tocqueville International is currently generating about -0.05 per unit of risk. If you would invest  2,651  in American Beacon Bridgeway on September 14, 2024 and sell it today you would earn a total of  148.00  from holding American Beacon Bridgeway or generate 5.58% return on investment over 90 days.

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

American Beacon Bridgeway  vs.  The Tocqueville International

American Beacon Bridgeway

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Bridgeway 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.

Tocqueville International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Tocqueville International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Tocqueville International 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 Tocqueville International

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

The idea behind American Beacon Bridgeway and The Tocqueville International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.