Correlation Between ABBEY MORTGAGE and ABC TRANSPORT

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

By analyzing existing cross correlation between ABBEY MORTGAGE BANK and ABC TRANSPORT PLC, you can compare the effects of market volatilities on ABBEY MORTGAGE and ABC TRANSPORT 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 ABBEY MORTGAGE with a short position of ABC TRANSPORT. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABBEY MORTGAGE and ABC TRANSPORT.

Diversification Opportunities for ABBEY MORTGAGE and ABC TRANSPORT

0.16

Correlation Coefficient

ABBEY MORTGAGE  ABC TRANSPORT

Average diversification

The 3 months correlation between ABBEY and ABC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ABBEY MORTGAGE BANK and ABC TRANSPORT PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC TRANSPORT PLC and ABBEY MORTGAGE 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 ABBEY MORTGAGE BANK are associated (or correlated) with ABC TRANSPORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC TRANSPORT PLC has no effect on the direction of ABBEY MORTGAGE i.e., ABBEY MORTGAGE and ABC TRANSPORT go up and down completely randomly.

Pair Corralation between ABBEY MORTGAGE and ABC TRANSPORT

Assuming the 90 days trading horizon ABBEY MORTGAGE is expected to generate 1.69 times less return on investment than ABC TRANSPORT. But when comparing it to its historical volatility, ABBEY MORTGAGE BANK is 1.29 times less risky than ABC TRANSPORT. It trades about 0.07 of its potential returns per unit of risk. ABC TRANSPORT PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  28.00  in ABC TRANSPORT PLC on October 11, 2024 and sell it today you would earn a total of  94.00  from holding ABC TRANSPORT PLC or generate 335.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.74%
Values	Daily Returns

ABBEY MORTGAGE BANK  vs.  ABC TRANSPORT PLC

ABBEY MORTGAGE BANK

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABBEY MORTGAGE BANK are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, ABBEY MORTGAGE exhibited solid returns over the last few months and may actually be approaching a breakup point.

ABC TRANSPORT PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABC TRANSPORT PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ABC TRANSPORT is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ABBEY MORTGAGE and ABC TRANSPORT

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

The idea behind ABBEY MORTGAGE BANK and ABC TRANSPORT PLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.