Correlation Between Disciplined Growth and Ab Concentrated

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

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

Diversification Opportunities for Disciplined Growth and Ab Concentrated

0.91

Correlation Coefficient

Disciplined Growth  Ab Concentrated

Almost no diversification

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

Pair Corralation between Disciplined Growth and Ab Concentrated

Assuming the 90 days horizon Disciplined Growth Fund is expected to under-perform the Ab Concentrated. In addition to that, Disciplined Growth is 1.57 times more volatile than Ab Centrated Growth. It trades about -0.12 of its total potential returns per unit of risk. Ab Centrated Growth is currently generating about -0.09 per unit of volatility. If you would invest  5,367  in Ab Centrated Growth on December 23, 2024 and sell it today you would lose (271.00) from holding Ab Centrated Growth or give up 5.05% of portfolio value over 90 days.

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

Disciplined Growth Fund  vs.  Ab Centrated Growth

Disciplined Growth

Risk-Adjusted Performance

Very Weak

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

Ab Centrated Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Disciplined Growth and Ab Concentrated

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

The idea behind Disciplined Growth Fund and Ab Centrated Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.