Correlation Between Abr Dynamic and Abr 75/25

Can any of the company-specific risk be diversified away by investing in both Abr Dynamic and Abr 75/25 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 Abr Dynamic and Abr 75/25 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Abr Dynamic Blend and Abr 7525 Volatility, you can compare the effects of market volatilities on Abr Dynamic and Abr 75/25 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 Abr Dynamic with a short position of Abr 75/25. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abr Dynamic and Abr 75/25.

Diversification Opportunities for Abr Dynamic and Abr 75/25

0.89

Correlation Coefficient

Abr Dynamic  Abr 75/25

Very poor diversification

The 3 months correlation between Abr and Abr is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Abr Dynamic Blend and Abr 7525 Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abr 7525 Volatility and Abr Dynamic 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 Abr Dynamic Blend are associated (or correlated) with Abr 75/25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abr 7525 Volatility has no effect on the direction of Abr Dynamic i.e., Abr Dynamic and Abr 75/25 go up and down completely randomly.

Pair Corralation between Abr Dynamic and Abr 75/25

Assuming the 90 days horizon Abr Dynamic Blend is expected to under-perform the Abr 75/25. But the mutual fund apears to be less risky and, when comparing its historical volatility, Abr Dynamic Blend is 1.59 times less risky than Abr 75/25. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Abr 7525 Volatility is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,078  in Abr 7525 Volatility on December 20, 2024 and sell it today you would lose (51.00) from holding Abr 7525 Volatility or give up 4.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Abr Dynamic Blend  vs.  Abr 7525 Volatility

Abr Dynamic Blend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abr Dynamic Blend has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Abr 7525 Volatility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abr 7525 Volatility has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Abr 75/25 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Abr Dynamic and Abr 75/25

The main advantage of trading using opposite Abr Dynamic and Abr 75/25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abr Dynamic position performs unexpectedly, Abr 75/25 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 Abr 75/25 will offset losses from the drop in Abr 75/25's long position.

The idea behind Abr Dynamic Blend and Abr 7525 Volatility 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.