Correlation Between ProShares VIX and American Beacon

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

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

Diversification Opportunities for ProShares VIX and American Beacon

-0.16

Correlation Coefficient

ProShares VIX  American Beacon

Good diversification

The 3 months correlation between ProShares and American is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Short Term and American Beacon Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Select and ProShares VIX 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 ProShares VIX Short Term 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 Select has no effect on the direction of ProShares VIX i.e., ProShares VIX and American Beacon go up and down completely randomly.

Pair Corralation between ProShares VIX and American Beacon

Given the investment horizon of 90 days ProShares VIX Short Term is expected to under-perform the American Beacon. In addition to that, ProShares VIX is 2.73 times more volatile than American Beacon Select. It trades about -0.07 of its total potential returns per unit of risk. American Beacon Select is currently generating about 0.13 per unit of volatility. If you would invest  2,276  in American Beacon Select on September 13, 2024 and sell it today you would earn a total of  61.00  from holding American Beacon Select or generate 2.68% return on investment over 90 days.

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

ProShares VIX Short Term  vs.  American Beacon Select

ProShares VIX Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares VIX Short Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

American Beacon Select

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Select are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, American Beacon is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares VIX and American Beacon

The main advantage of trading using opposite ProShares VIX and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares VIX 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 ProShares VIX Short Term and American Beacon Select 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.