Correlation Between Ab Fixed-income and Ultra Short

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

Diversification Opportunities for Ab Fixed-income and Ultra Short

0.0

Correlation Coefficient

Ab Fixed-income  Ultra Short

Pay attention - limited upside

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

Pair Corralation between Ab Fixed-income and Ultra Short

Assuming the 90 days horizon Ab Fixed Income Shares is expected to generate 696.47 times more return on investment than Ultra Short. However, Ab Fixed-income is 696.47 times more volatile than Ultra Short Term Fixed. It trades about 0.06 of its potential returns per unit of risk. Ultra Short Term Fixed is currently generating about 0.46 per unit of risk. If you would invest  409.00  in Ab Fixed Income Shares on October 23, 2024 and sell it today you would lose (309.00) from holding Ab Fixed Income Shares or give up 75.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	50.2%
Values	Daily Returns

Ab Fixed Income Shares  vs.  Ultra Short Term Fixed

Ab Fixed Income

Risk-Adjusted Performance

0 of 100

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.

Ultra Short Term

Risk-Adjusted Performance

41 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Term Fixed are ranked lower than 41 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Fixed-income and Ultra Short

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

The idea behind Ab Fixed Income Shares and Ultra Short Term Fixed 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.