Correlation Between Ab Bond and Wasatch Small

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

Diversification Opportunities for Ab Bond and Wasatch Small

0.06

Correlation Coefficient

Ab Bond  Wasatch Small

Significant diversification

The 3 months correlation between ABNYX and Wasatch is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Wasatch Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Small Cap 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 Wasatch Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Small Cap has no effect on the direction of Ab Bond i.e., Ab Bond and Wasatch Small go up and down completely randomly.

Pair Corralation between Ab Bond and Wasatch Small

Assuming the 90 days horizon Ab Bond is expected to generate 3.48 times less return on investment than Wasatch Small. But when comparing it to its historical volatility, Ab Bond Inflation is 4.31 times less risky than Wasatch Small. It trades about 0.05 of its potential returns per unit of risk. Wasatch Small Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,630  in Wasatch Small Cap on October 24, 2024 and sell it today you would earn a total of  884.00  from holding Wasatch Small Cap or generate 24.35% 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.  Wasatch Small Cap

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 basic indicators, Ab Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Wasatch Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ab Bond and Wasatch Small

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

The idea behind Ab Bond Inflation and Wasatch Small 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.