Correlation Between Ab Fixed-income and Small Capitalization

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

By analyzing existing cross correlation between Ab Fixed Income Shares and Small Capitalization Portfolio, you can compare the effects of market volatilities on Ab Fixed-income and Small Capitalization 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 Fixed-income with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Fixed-income and Small Capitalization.

Diversification Opportunities for Ab Fixed-income and Small Capitalization

0.0

Correlation Coefficient

Ab Fixed-income  Small Capitalization

Pay attention - limited upside

The 3 months correlation between AECXX and Small is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ab Fixed Income Shares and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Ab Fixed-income 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 Fixed Income Shares are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Ab Fixed-income i.e., Ab Fixed-income and Small Capitalization go up and down completely randomly.

Pair Corralation between Ab Fixed-income and Small Capitalization

If you would invest  100.00  in Ab Fixed Income Shares on December 4, 2024 and sell it today you would earn a total of  0.00  from holding Ab Fixed Income Shares or generate 0.0% return on investment over 90 days.

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

Ab Fixed Income Shares  vs.  Small Capitalization Portfolio

Ab Fixed Income

Risk-Adjusted Performance

Very Weak

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

Small Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Capitalization Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Ab Fixed-income and Small Capitalization

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

The idea behind Ab Fixed Income Shares and Small Capitalization Portfolio 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.