Correlation Between Oil Gas and American Beacon

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

By analyzing existing cross correlation between Oil Gas Ultrasector and American Beacon Ssi, you can compare the effects of market volatilities on Oil Gas 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 Oil Gas with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Gas and American Beacon.

Diversification Opportunities for Oil Gas and American Beacon

0.21

Correlation Coefficient

Oil Gas  American Beacon

Modest diversification

The 3 months correlation between Oil and American is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and American Beacon Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ssi and Oil Gas 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 Oil Gas Ultrasector 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 Ssi has no effect on the direction of Oil Gas i.e., Oil Gas and American Beacon go up and down completely randomly.

Pair Corralation between Oil Gas and American Beacon

Assuming the 90 days horizon Oil Gas Ultrasector is expected to under-perform the American Beacon. In addition to that, Oil Gas is 22.23 times more volatile than American Beacon Ssi. It trades about -0.09 of its total potential returns per unit of risk. American Beacon Ssi is currently generating about 0.28 per unit of volatility. If you would invest  985.00  in American Beacon Ssi on September 23, 2024 and sell it today you would earn a total of  15.00  from holding American Beacon Ssi or generate 1.52% return on investment over 90 days.

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

Oil Gas Ultrasector  vs.  American Beacon Ssi

Oil Gas Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Gas Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Beacon Ssi

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ssi are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, American Beacon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oil Gas and American Beacon

The main advantage of trading using opposite Oil Gas and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Gas 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 Oil Gas Ultrasector and American Beacon Ssi 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.