Correlation Between American Beacon and Dupont Denemours

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Can any of the company-specific risk be diversified away by investing in both American Beacon and Dupont Denemours 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 Dupont Denemours into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Mid-Cap and Dupont Denemours, you can compare the effects of market volatilities on American Beacon and Dupont Denemours 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 Dupont Denemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Dupont Denemours.

Diversification Opportunities for American Beacon and Dupont Denemours

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between American and Dupont is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Mid-Cap and Dupont Denemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont Denemours 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 Mid-Cap are associated (or correlated) with Dupont Denemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont Denemours has no effect on the direction of American Beacon i.e., American Beacon and Dupont Denemours go up and down completely randomly.

Pair Corralation between American Beacon and Dupont Denemours

Assuming the 90 days horizon American Beacon Mid-Cap is expected to generate 0.76 times more return on investment than Dupont Denemours. However, American Beacon Mid-Cap is 1.32 times less risky than Dupont Denemours. It trades about -0.3 of its potential returns per unit of risk. Dupont Denemours is currently generating about -0.35 per unit of risk. If you would invest  1,786  in American Beacon Mid-Cap on June 26, 2022 and sell it today you would lose (189.00)  from holding American Beacon Mid-Cap or give up 10.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

American Beacon Mid-Cap  vs.  Dupont Denemours

 Performance (%) 
       Timeline  
American Beacon Mid-Cap 
American Performance
0 of 100
Over the last 90 days American Beacon Mid-Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Beacon is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

Dupont Denemours 
Dupont Performance
0 of 100
Over the last 90 days Dupont Denemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Dupont Price Channel

American Beacon and Dupont Denemours Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Beacon and Dupont Denemours

The main advantage of trading using opposite American Beacon and Dupont Denemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Dupont Denemours 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 Dupont Denemours will offset losses from the drop in Dupont Denemours' long position.
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The idea behind American Beacon Mid-Cap and Dupont Denemours 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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