Correlation Between Nicholas and American Beacon

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

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

Diversification Opportunities for Nicholas and American Beacon

0.92

Correlation Coefficient

Nicholas  American Beacon

Almost no diversification

The 3 months correlation between Nicholas and American is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Ii Inc and American Beacon Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Large and Nicholas 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 Nicholas Ii Inc 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 Large has no effect on the direction of Nicholas i.e., Nicholas and American Beacon go up and down completely randomly.

Pair Corralation between Nicholas and American Beacon

Assuming the 90 days horizon Nicholas Ii Inc is expected to generate 1.23 times more return on investment than American Beacon. However, Nicholas is 1.23 times more volatile than American Beacon Large. It trades about 0.12 of its potential returns per unit of risk. American Beacon Large is currently generating about 0.07 per unit of risk. If you would invest  3,329  in Nicholas Ii Inc on September 17, 2024 and sell it today you would earn a total of  203.00  from holding Nicholas Ii Inc or generate 6.1% return on investment over 90 days.

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

Nicholas Ii Inc  vs.  American Beacon Large

Nicholas Ii

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Ii Inc are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nicholas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Large

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Large are ranked lower than 5 (%) 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.

Pair Trading with Nicholas and American Beacon

The main advantage of trading using opposite Nicholas and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nicholas 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 Nicholas Ii Inc and American Beacon Large 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.