Correlation Between Wilmington Trust and American Beacon

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

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

Diversification Opportunities for Wilmington Trust and American Beacon

0.89

Correlation Coefficient

Wilmington Trust  American Beacon

Very poor diversification

The 3 months correlation between Wilmington and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Trust Retirement and American Beacon Bridgeway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Bridgeway and Wilmington Trust 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 Wilmington Trust Retirement 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 Bridgeway has no effect on the direction of Wilmington Trust i.e., Wilmington Trust and American Beacon go up and down completely randomly.

Pair Corralation between Wilmington Trust and American Beacon

Assuming the 90 days trading horizon Wilmington Trust is expected to generate 1.02 times less return on investment than American Beacon. But when comparing it to its historical volatility, Wilmington Trust Retirement is 1.1 times less risky than American Beacon. It trades about 0.09 of its potential returns per unit of risk. American Beacon Bridgeway is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,632  in American Beacon Bridgeway on September 20, 2024 and sell it today you would earn a total of  172.00  from holding American Beacon Bridgeway or generate 4.74% return on investment over 90 days.

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

Wilmington Trust Retirement  vs.  American Beacon Bridgeway

Wilmington Trust Ret

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmington Trust Retirement are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wilmington Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Bridgeway

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Bridgeway are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental 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 Wilmington Trust and American Beacon

The main advantage of trading using opposite Wilmington Trust and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmington Trust 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 Wilmington Trust Retirement and American Beacon Bridgeway 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .