Correlation Between Absolute Capital and Quantitative

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

By analyzing existing cross correlation between Absolute Capital Asset and Quantitative Longshort Equity, you can compare the effects of market volatilities on Absolute Capital and Quantitative 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 Absolute Capital with a short position of Quantitative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Capital and Quantitative.

Diversification Opportunities for Absolute Capital and Quantitative

0.62

Correlation Coefficient

Absolute Capital  Quantitative

Poor diversification

The 3 months correlation between Absolute and Quantitative is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Capital Asset and Quantitative Longshort Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative Longshort and Absolute Capital 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 Absolute Capital Asset are associated (or correlated) with Quantitative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative Longshort has no effect on the direction of Absolute Capital i.e., Absolute Capital and Quantitative go up and down completely randomly.

Pair Corralation between Absolute Capital and Quantitative

Assuming the 90 days horizon Absolute Capital Asset is expected to generate 1.16 times more return on investment than Quantitative. However, Absolute Capital is 1.16 times more volatile than Quantitative Longshort Equity. It trades about 0.06 of its potential returns per unit of risk. Quantitative Longshort Equity is currently generating about 0.04 per unit of risk. If you would invest  911.00  in Absolute Capital Asset on October 4, 2024 and sell it today you would earn a total of  159.00  from holding Absolute Capital Asset or generate 17.45% return on investment over 90 days.

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

Absolute Capital Asset  vs.  Quantitative Longshort Equity

Absolute Capital Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Capital Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Quantitative Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantitative Longshort Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Quantitative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absolute Capital and Quantitative

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

The idea behind Absolute Capital Asset and Quantitative Longshort Equity 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.