Correlation Between Locorr Market and American Beacon

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

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

Diversification Opportunities for Locorr Market and American Beacon

-0.1

Correlation Coefficient

Locorr Market  American Beacon

Good diversification

The 3 months correlation between Locorr and American is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Locorr Market Trend and American Beacon Sound in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Sound and Locorr Market 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 Locorr Market Trend 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 Sound has no effect on the direction of Locorr Market i.e., Locorr Market and American Beacon go up and down completely randomly.

Pair Corralation between Locorr Market and American Beacon

Assuming the 90 days horizon Locorr Market Trend is expected to under-perform the American Beacon. In addition to that, Locorr Market is 2.9 times more volatile than American Beacon Sound. It trades about -0.03 of its total potential returns per unit of risk. American Beacon Sound is currently generating about 0.07 per unit of volatility. If you would invest  779.00  in American Beacon Sound on September 23, 2024 and sell it today you would earn a total of  9.00  from holding American Beacon Sound or generate 1.16% return on investment over 90 days.

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

Locorr Market Trend  vs.  American Beacon Sound

Locorr Market Trend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Locorr Market Trend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Locorr Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Sound

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Sound are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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 Locorr Market and American Beacon

The main advantage of trading using opposite Locorr Market and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Locorr Market 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 Locorr Market Trend and American Beacon Sound 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.