Correlation Between Ab Value and Acadian Emerging

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

By analyzing existing cross correlation between Ab Value Fund and Acadian Emerging Markets, you can compare the effects of market volatilities on Ab Value and Acadian Emerging 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 Value with a short position of Acadian Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Value and Acadian Emerging.

Diversification Opportunities for Ab Value and Acadian Emerging

0.1

Correlation Coefficient

Ab Value  Acadian Emerging

Average diversification

The 3 months correlation between ABVCX and Acadian is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Acadian Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadian Emerging Markets and Ab Value 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 Value Fund are associated (or correlated) with Acadian Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadian Emerging Markets has no effect on the direction of Ab Value i.e., Ab Value and Acadian Emerging go up and down completely randomly.

Pair Corralation between Ab Value and Acadian Emerging

Assuming the 90 days horizon Ab Value is expected to generate 2.44 times less return on investment than Acadian Emerging. But when comparing it to its historical volatility, Ab Value Fund is 1.2 times less risky than Acadian Emerging. It trades about 0.03 of its potential returns per unit of risk. Acadian Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,253  in Acadian Emerging Markets on December 29, 2024 and sell it today you would earn a total of  82.00  from holding Acadian Emerging Markets or generate 3.64% return on investment over 90 days.

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

Ab Value Fund  vs.  Acadian Emerging Markets

Ab Value Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Ab Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Acadian Emerging Markets

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Acadian Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Acadian Emerging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Value and Acadian Emerging

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

The idea behind Ab Value Fund and Acadian Emerging Markets 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.