Correlation Between Cliffwater Corporate and American Beacon

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Can any of the company-specific risk be diversified away by investing in both Cliffwater Corporate and American Beacon 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 Cliffwater Corporate and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cliffwater Corporate Lending and American Beacon Twentyfour, you can compare the effects of market volatilities on Cliffwater Corporate and American Beacon 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 Cliffwater Corporate with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cliffwater Corporate and American Beacon.

Diversification Opportunities for Cliffwater Corporate and American Beacon

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Cliffwater and American is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cliffwater Corporate Lending and American Beacon Twentyfour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Twen and Cliffwater Corporate 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 Cliffwater Corporate Lending are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Twen has no effect on the direction of Cliffwater Corporate i.e., Cliffwater Corporate and American Beacon go up and down completely randomly.

Pair Corralation between Cliffwater Corporate and American Beacon

Assuming the 90 days horizon Cliffwater Corporate Lending is expected to generate 0.54 times more return on investment than American Beacon. However, Cliffwater Corporate Lending is 1.85 times less risky than American Beacon. It trades about 0.81 of its potential returns per unit of risk. American Beacon Twentyfour is currently generating about 0.1 per unit of risk. If you would invest  1,061  in Cliffwater Corporate Lending on September 20, 2024 and sell it today you would earn a total of  27.00  from holding Cliffwater Corporate Lending or generate 2.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Cliffwater Corporate Lending  vs.  American Beacon Twentyfour

 Performance 
       Timeline  
Cliffwater Corporate 

Risk-Adjusted Performance

63 of 100

 
Weak
 
Strong
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in Cliffwater Corporate Lending are ranked lower than 63 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cliffwater Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
American Beacon Twen 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Twentyfour are ranked lower than 7 (%) 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.

Cliffwater Corporate and American Beacon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cliffwater Corporate and American Beacon

The main advantage of trading using opposite Cliffwater Corporate and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cliffwater Corporate position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.
The idea behind Cliffwater Corporate Lending and American Beacon Twentyfour 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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