Correlation Between American Beacon and Invesco ESG

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Can any of the company-specific risk be diversified away by investing in both American Beacon and Invesco ESG 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 Invesco ESG 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 Invesco ESG Nasdaq, you can compare the effects of market volatilities on American Beacon and Invesco ESG 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 Invesco ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Invesco ESG.

Diversification Opportunities for American Beacon and Invesco ESG

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between American and Invesco is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Mid-Cap and Invesco ESG Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco ESG Nasdaq 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 Invesco ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco ESG Nasdaq has no effect on the direction of American Beacon i.e., American Beacon and Invesco ESG go up and down completely randomly.

Pair Corralation between American Beacon and Invesco ESG

Assuming the 90 days horizon American Beacon Mid-Cap is expected to generate 1.29 times more return on investment than Invesco ESG. However, American Beacon is 1.29 times more volatile than Invesco ESG Nasdaq. It trades about 0.02 of its potential returns per unit of risk. Invesco ESG Nasdaq is currently generating about -0.04 per unit of risk. If you would invest  1,070  in American Beacon Mid-Cap on August 30, 2022 and sell it today you would earn a total of  147.00  from holding American Beacon Mid-Cap or generate 13.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy55.69%
ValuesDaily Returns

American Beacon Mid-Cap  vs.  Invesco ESG Nasdaq

 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 weak basic indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in December 2022.
Invesco ESG Nasdaq 
Invesco Performance
0 of 100
Over the last 90 days Invesco ESG Nasdaq has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Invesco ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Price Channel

American Beacon and Invesco ESG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Beacon and Invesco ESG

The main advantage of trading using opposite American Beacon and Invesco ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon position performs unexpectedly, Invesco ESG 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 Invesco ESG will offset losses from the drop in Invesco ESG's long position.
American Beacon vs. John Hancock Funds
The idea behind American Beacon Mid-Cap and Invesco ESG Nasdaq 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.
Invesco ESG vs. Invesco SP Midcap
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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