Correlation Between Ab Impact and Vanguard Mega

Can any of the company-specific risk be diversified away by investing in both Ab Impact and Vanguard Mega 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 Vanguard Mega 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 Vanguard Mega Cap, you can compare the effects of market volatilities on Ab Impact and Vanguard Mega 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 Vanguard Mega. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Impact and Vanguard Mega.

Diversification Opportunities for Ab Impact and Vanguard Mega

0.53

Correlation Coefficient

Ab Impact  Vanguard Mega

Very weak diversification

The 3 months correlation between ABIMX and Vanguard is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ab Impact Municipal and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap 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 Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of Ab Impact i.e., Ab Impact and Vanguard Mega go up and down completely randomly.

Pair Corralation between Ab Impact and Vanguard Mega

Assuming the 90 days horizon Ab Impact Municipal is expected to under-perform the Vanguard Mega. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab Impact Municipal is 2.57 times less risky than Vanguard Mega. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Vanguard Mega Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  24,689  in Vanguard Mega Cap on December 29, 2024 and sell it today you would earn a total of  563.00  from holding Vanguard Mega Cap or generate 2.28% return on investment over 90 days.

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

Ab Impact Municipal  vs.  Vanguard Mega Cap

Ab Impact Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Impact Municipal has generated negative risk-adjusted returns adding no value to fund investors. 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.

Vanguard Mega Cap

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Vanguard Mega 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 Vanguard Mega

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

The idea behind Ab Impact Municipal and Vanguard Mega Cap 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.