Correlation Between American Beacon and Baird Core

Can any of the company-specific risk be diversified away by investing in both American Beacon and Baird Core 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 Baird Core 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 Baird E Plus, you can compare the effects of market volatilities on American Beacon and Baird Core 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 Baird Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Baird Core.

Diversification Opportunities for American Beacon and Baird Core

-0.67

Correlation Coefficient

American Beacon  Baird Core

Excellent diversification

The 3 months correlation between American and Baird is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Bridgeway and Baird E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird E Plus 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 Baird Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird E Plus has no effect on the direction of American Beacon i.e., American Beacon and Baird Core go up and down completely randomly.

Pair Corralation between American Beacon and Baird Core

Assuming the 90 days horizon American Beacon Bridgeway is expected to generate 2.94 times more return on investment than Baird Core. However, American Beacon is 2.94 times more volatile than Baird E Plus. It trades about 0.18 of its potential returns per unit of risk. Baird E Plus is currently generating about -0.05 per unit of risk. If you would invest  2,612  in American Beacon Bridgeway on September 4, 2024 and sell it today you would earn a total of  244.00  from holding American Beacon Bridgeway or generate 9.34% return on investment over 90 days.

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

American Beacon Bridgeway  vs.  Baird E Plus

American Beacon Bridgeway

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Bridgeway are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baird E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baird E Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Baird Core 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 Baird Core

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

The idea behind American Beacon Bridgeway and Baird E Plus 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.