Correlation Between Ab Impact and Moderately Conservative

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

By analyzing existing cross correlation between Ab Impact Municipal and Moderately Servative Balanced, you can compare the effects of market volatilities on Ab Impact and Moderately Conservative 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 Ab Impact with a short position of Moderately Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Impact and Moderately Conservative.

Diversification Opportunities for Ab Impact and Moderately Conservative

-0.15

Correlation Coefficient

Ab Impact  Moderately Conservative

Good diversification

The 3 months correlation between ABIMX and Moderately is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ab Impact Municipal and Moderately Servative Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Conservative and Ab Impact 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 Ab Impact Municipal are associated (or correlated) with Moderately Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Conservative has no effect on the direction of Ab Impact i.e., Ab Impact and Moderately Conservative go up and down completely randomly.

Pair Corralation between Ab Impact and Moderately Conservative

Assuming the 90 days horizon Ab Impact is expected to generate 1.19 times less return on investment than Moderately Conservative. But when comparing it to its historical volatility, Ab Impact Municipal is 1.91 times less risky than Moderately Conservative. It trades about 0.08 of its potential returns per unit of risk. Moderately Servative Balanced is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  981.00  in Moderately Servative Balanced on September 3, 2024 and sell it today you would earn a total of  143.00  from holding Moderately Servative Balanced or generate 14.58% return on investment over 90 days.

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

Ab Impact Municipal  vs.  Moderately Servative Balanced

Ab Impact Municipal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Impact Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Ab Impact is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Moderately Conservative

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Servative Balanced are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Moderately Conservative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Impact and Moderately Conservative

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

The idea behind Ab Impact Municipal and Moderately Servative Balanced 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.