Correlation Between Absolute Capital and Absolute Capital

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

By analyzing existing cross correlation between Absolute Capital Defender and Absolute Capital Asset, you can compare the effects of market volatilities on Absolute Capital and Absolute Capital 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 Absolute Capital with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Capital and Absolute Capital.

Diversification Opportunities for Absolute Capital and Absolute Capital

0.95

Correlation Coefficient

Absolute Capital  Absolute Capital

Almost no diversification

The 3 months correlation between Absolute and Absolute is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Capital Defender and Absolute Capital Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Asset and Absolute Capital 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 Absolute Capital Defender are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Asset has no effect on the direction of Absolute Capital i.e., Absolute Capital and Absolute Capital go up and down completely randomly.

Pair Corralation between Absolute Capital and Absolute Capital

Assuming the 90 days horizon Absolute Capital Defender is expected to under-perform the Absolute Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Absolute Capital Defender is 1.04 times less risky than Absolute Capital. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Absolute Capital Asset is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,164  in Absolute Capital Asset on September 30, 2024 and sell it today you would lose (6.00) from holding Absolute Capital Asset or give up 0.52% of portfolio value over 90 days.

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

Absolute Capital Defender  vs.  Absolute Capital Asset

Absolute Capital Defender

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Capital Defender has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Absolute Capital Asset

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Absolute Capital and Absolute Capital

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

The idea behind Absolute Capital Defender and Absolute Capital Asset 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.