Correlation Between American Beacon and Tradr 2X

Can any of the company-specific risk be diversified away by investing in both American Beacon and Tradr 2X 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 Tradr 2X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Beacon Select and Tradr 2X Long, you can compare the effects of market volatilities on American Beacon and Tradr 2X 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 Tradr 2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Tradr 2X.

Diversification Opportunities for American Beacon and Tradr 2X

-0.12

Correlation Coefficient

American Beacon  Tradr 2X

Good diversification

The 3 months correlation between American and Tradr is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Select and Tradr 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradr 2X Long 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 Select are associated (or correlated) with Tradr 2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradr 2X Long has no effect on the direction of American Beacon i.e., American Beacon and Tradr 2X go up and down completely randomly.

Pair Corralation between American Beacon and Tradr 2X

Given the investment horizon of 90 days American Beacon Select is expected to generate 0.32 times more return on investment than Tradr 2X. However, American Beacon Select is 3.14 times less risky than Tradr 2X. It trades about 0.18 of its potential returns per unit of risk. Tradr 2X Long is currently generating about -0.02 per unit of risk. If you would invest  2,811  in American Beacon Select on September 12, 2024 and sell it today you would earn a total of  368.00  from holding American Beacon Select or generate 13.09% return on investment over 90 days.

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

American Beacon Select  vs.  Tradr 2X Long

American Beacon Select

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Select are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tradr 2X Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tradr 2X Long has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tradr 2X is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with American Beacon and Tradr 2X

The main advantage of trading using opposite American Beacon and Tradr 2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Tradr 2X 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 Tradr 2X will offset losses from the drop in Tradr 2X's long position.

The idea behind American Beacon Select and Tradr 2X Long 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.