Correlation Between American Beacon and Inverse Government
Can any of the company-specific risk be diversified away by investing in both American Beacon and Inverse Government 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 Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Sim and Inverse Government Long, you can compare the effects of market volatilities on American Beacon and Inverse Government 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 Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Inverse Government.
Diversification Opportunities for American Beacon and Inverse Government
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Inverse is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Sim and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government 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 Sim are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of American Beacon i.e., American Beacon and Inverse Government go up and down completely randomly.
Pair Corralation between American Beacon and Inverse Government
Assuming the 90 days horizon American Beacon is expected to generate 12.9 times less return on investment than Inverse Government. But when comparing it to its historical volatility, American Beacon Sim is 7.22 times less risky than Inverse Government. It trades about 0.03 of its potential returns per unit of risk. Inverse Government Long is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17,358 in Inverse Government Long on September 16, 2024 and sell it today you would earn a total of 673.00 from holding Inverse Government Long or generate 3.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
American Beacon Sim vs. Inverse Government Long
Performance |
Timeline |
American Beacon Sim |
Inverse Government Long |
American Beacon and Inverse Government Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Beacon and Inverse Government
The main advantage of trading using opposite American Beacon and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Inverse Government 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 Inverse Government will offset losses from the drop in Inverse Government's long position.American Beacon vs. Inverse Government Long | American Beacon vs. Schwab Government Money | American Beacon vs. Intermediate Government Bond | American Beacon vs. Us Government Securities |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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