Correlation Between American Beacon and Brandes International

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

By analyzing existing cross correlation between American Beacon Ark and Brandes International Small, you can compare the effects of market volatilities on American Beacon and Brandes International 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 Brandes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Brandes International.

Diversification Opportunities for American Beacon and Brandes International

-0.61

Correlation Coefficient

American Beacon  Brandes International

Excellent diversification

The 3 months correlation between American and Brandes is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Ark and Brandes International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes International 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 Ark are associated (or correlated) with Brandes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes International has no effect on the direction of American Beacon i.e., American Beacon and Brandes International go up and down completely randomly.

Pair Corralation between American Beacon and Brandes International

Assuming the 90 days horizon American Beacon Ark is expected to under-perform the Brandes International. In addition to that, American Beacon is 2.65 times more volatile than Brandes International Small. It trades about -0.13 of its total potential returns per unit of risk. Brandes International Small is currently generating about 0.34 per unit of volatility. If you would invest  1,498  in Brandes International Small on March 2, 2024 and sell it today you would earn a total of  236.00  from holding Brandes International Small or generate 15.75% return on investment over 90 days.

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

American Beacon Ark  vs.  Brandes International Small

American Beacon Ark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Ark has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

Brandes International

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brandes International Small are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Brandes International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Beacon and Brandes International

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

The idea behind American Beacon Ark and Brandes International Small 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.