Correlation Between Ab Value and Ariel Fund

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

Diversification Opportunities for Ab Value and Ariel Fund

0.96

Correlation Coefficient

Ab Value  Ariel Fund

Almost no diversification

The 3 months correlation between ABVCX and Ariel is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Ariel Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Fund Institutional 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 Ariel Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Fund Institutional has no effect on the direction of Ab Value i.e., Ab Value and Ariel Fund go up and down completely randomly.

Pair Corralation between Ab Value and Ariel Fund

Assuming the 90 days horizon Ab Value Fund is expected to generate 0.63 times more return on investment than Ariel Fund. However, Ab Value Fund is 1.58 times less risky than Ariel Fund. It trades about 0.08 of its potential returns per unit of risk. Ariel Fund Institutional is currently generating about 0.05 per unit of risk. If you would invest  1,510  in Ab Value Fund on September 3, 2024 and sell it today you would earn a total of  566.00  from holding Ab Value Fund or generate 37.48% return on investment over 90 days.

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

Ab Value Fund  vs.  Ariel Fund Institutional

Ab Value Fund

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ab Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ariel Fund Institutional

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Fund Institutional are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ariel Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ab Value and Ariel Fund

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

The idea behind Ab Value Fund and Ariel Fund Institutional 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.