Correlation Between American Beacon and BlackRock ETF

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

Diversification Opportunities for American Beacon and BlackRock ETF

-0.02

Correlation Coefficient

American Beacon  BlackRock ETF

Good diversification

The 3 months correlation between American and BlackRock is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Select and BlackRock ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock ETF Trust 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 BlackRock ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock ETF Trust has no effect on the direction of American Beacon i.e., American Beacon and BlackRock ETF go up and down completely randomly.

Pair Corralation between American Beacon and BlackRock ETF

Given the investment horizon of 90 days American Beacon Select is expected to generate 0.89 times more return on investment than BlackRock ETF. However, American Beacon Select is 1.13 times less risky than BlackRock ETF. It trades about 0.18 of its potential returns per unit of risk. BlackRock ETF Trust is currently generating about 0.08 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	55.56%
Values	Daily Returns

American Beacon Select  vs.  BlackRock ETF Trust

American Beacon Select

Risk-Adjusted Performance

13 of 100

Solid

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 reported solid returns over the last few months and may actually be approaching a breakup point.

BlackRock ETF Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock ETF Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent technical and fundamental indicators, BlackRock ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Beacon and BlackRock ETF

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

The idea behind American Beacon Select and BlackRock ETF Trust 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.