Correlation Between American Beacon and Locorr Macro

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

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

Diversification Opportunities for American Beacon and Locorr Macro

0.97

Correlation Coefficient

American Beacon  Locorr Macro

Almost no diversification

The 3 months correlation between American and Locorr is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Ahl and Locorr Macro Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Macro Strategies 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 Ahl are associated (or correlated) with Locorr Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Macro Strategies has no effect on the direction of American Beacon i.e., American Beacon and Locorr Macro go up and down completely randomly.

Pair Corralation between American Beacon and Locorr Macro

Assuming the 90 days horizon American Beacon Ahl is expected to under-perform the Locorr Macro. In addition to that, American Beacon is 1.5 times more volatile than Locorr Macro Strategies. It trades about -0.08 of its total potential returns per unit of risk. Locorr Macro Strategies is currently generating about 0.08 per unit of volatility. If you would invest  748.00  in Locorr Macro Strategies on February 4, 2024 and sell it today you would earn a total of  7.00  from holding Locorr Macro Strategies or generate 0.94% return on investment over 90 days.

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

American Beacon Ahl  vs.  Locorr Macro Strategies

American Beacon Ahl

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ahl are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Locorr Macro Strategies

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Macro Strategies are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Locorr Macro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Beacon and Locorr Macro

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

The idea behind American Beacon Ahl and Locorr Macro Strategies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.