Correlation Between Ab Value and Nasdaq 100

Can any of the company-specific risk be diversified away by investing in both Ab Value and Nasdaq 100 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 Nasdaq 100 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 Nasdaq 100 Fund Class, you can compare the effects of market volatilities on Ab Value and Nasdaq 100 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 Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Value and Nasdaq 100.

Diversification Opportunities for Ab Value and Nasdaq 100

0.91

Correlation Coefficient

Ab Value  Nasdaq 100

Almost no diversification

The 3 months correlation between ABVCX and Nasdaq is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Nasdaq 100 Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund 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 Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of Ab Value i.e., Ab Value and Nasdaq 100 go up and down completely randomly.

Pair Corralation between Ab Value and Nasdaq 100

Assuming the 90 days horizon Ab Value is expected to generate 1.66 times less return on investment than Nasdaq 100. But when comparing it to its historical volatility, Ab Value Fund is 1.47 times less risky than Nasdaq 100. It trades about 0.09 of its potential returns per unit of risk. Nasdaq 100 Fund Class is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,605  in Nasdaq 100 Fund Class on September 12, 2024 and sell it today you would earn a total of  2,376  from holding Nasdaq 100 Fund Class or generate 42.39% 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.  Nasdaq 100 Fund Class

Ab Value Fund

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 16 (%) 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.

Nasdaq 100 Fund

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 Fund Class are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nasdaq 100 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ab Value and Nasdaq 100

The main advantage of trading using opposite Ab Value and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Value position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.

The idea behind Ab Value Fund and Nasdaq 100 Fund Class 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.