Correlation Between AB International and Duo World

Can any of the company-specific risk be diversified away by investing in both AB International and Duo World 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 International and Duo World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AB International Group and Duo World, you can compare the effects of market volatilities on AB International and Duo World 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 International with a short position of Duo World. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB International and Duo World.

Diversification Opportunities for AB International and Duo World

-0.18

Correlation Coefficient

AB International  Duo World

Good diversification

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

Pair Corralation between AB International and Duo World

Given the investment horizon of 90 days AB International Group is expected to generate 1.64 times more return on investment than Duo World. However, AB International is 1.64 times more volatile than Duo World. It trades about 0.12 of its potential returns per unit of risk. Duo World is currently generating about 0.02 per unit of risk. If you would invest  0.06  in AB International Group on October 10, 2024 and sell it today you would earn a total of  0.02  from holding AB International Group or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

AB International Group  vs.  Duo World

AB International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB International Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, AB International reported solid returns over the last few months and may actually be approaching a breakup point.

Duo World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duo World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with AB International and Duo World

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

The idea behind AB International Group and Duo World 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 Transaction History module to view history of all your transactions and understand their impact on performance.