Correlation Between Ab Bond and Glg Intl

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

By analyzing existing cross correlation between Ab Bond Inflation and Glg Intl Small, you can compare the effects of market volatilities on Ab Bond and Glg Intl 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 Bond with a short position of Glg Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and Glg Intl.

Diversification Opportunities for Ab Bond and Glg Intl

0.18

Correlation Coefficient

Ab Bond  Glg Intl

Average diversification

The 3 months correlation between ABNCX and Glg is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Glg Intl Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glg Intl Small and Ab Bond 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 Bond Inflation are associated (or correlated) with Glg Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glg Intl Small has no effect on the direction of Ab Bond i.e., Ab Bond and Glg Intl go up and down completely randomly.

Pair Corralation between Ab Bond and Glg Intl

Assuming the 90 days horizon Ab Bond is expected to generate 5.64 times less return on investment than Glg Intl. But when comparing it to its historical volatility, Ab Bond Inflation is 5.11 times less risky than Glg Intl. It trades about 0.18 of its potential returns per unit of risk. Glg Intl Small is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,544  in Glg Intl Small on October 26, 2024 and sell it today you would earn a total of  289.00  from holding Glg Intl Small or generate 3.38% return on investment over 90 days.

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

Ab Bond Inflation  vs.  Glg Intl Small

Ab Bond Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Glg Intl Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glg Intl Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Glg Intl may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ab Bond and Glg Intl

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

The idea behind Ab Bond Inflation and Glg Intl Small 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.