Correlation Between American Beacon and Harbor Health

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

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

Diversification Opportunities for American Beacon and Harbor Health

-0.84

Correlation Coefficient

American Beacon  Harbor Health

Pay attention - limited upside

The 3 months correlation between American and Harbor is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon GLG and Harbor Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Health Care 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 GLG are associated (or correlated) with Harbor Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Health Care has no effect on the direction of American Beacon i.e., American Beacon and Harbor Health go up and down completely randomly.

Pair Corralation between American Beacon and Harbor Health

Given the investment horizon of 90 days American Beacon GLG is expected to generate 1.69 times more return on investment than Harbor Health. However, American Beacon is 1.69 times more volatile than Harbor Health Care. It trades about 0.09 of its potential returns per unit of risk. Harbor Health Care is currently generating about -0.07 per unit of risk. If you would invest  3,061  in American Beacon GLG on February 29, 2024 and sell it today you would earn a total of  81.00  from holding American Beacon GLG or generate 2.65% return on investment over 90 days.

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

American Beacon GLG  vs.  Harbor Health Care

American Beacon GLG

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon GLG are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, American Beacon reported solid returns over the last few months and may actually be approaching a breakup point.

Harbor Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Harbor Health is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with American Beacon and Harbor Health

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

The idea behind American Beacon GLG and Harbor Health Care 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.