Correlation Between Ab Global and Avantis Equity

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

By analyzing existing cross correlation between Ab Global Real and Avantis Equity, you can compare the effects of market volatilities on Ab Global and Avantis Equity 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 Global with a short position of Avantis Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and Avantis Equity.

Diversification Opportunities for Ab Global and Avantis Equity

-0.61

Correlation Coefficient

Ab Global  Avantis Equity

Excellent diversification

The 3 months correlation between AEEIX and Avantis is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Real and Avantis Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Equity and Ab Global 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 Global Real are associated (or correlated) with Avantis Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Equity has no effect on the direction of Ab Global i.e., Ab Global and Avantis Equity go up and down completely randomly.

Pair Corralation between Ab Global and Avantis Equity

Assuming the 90 days horizon Ab Global Real is expected to under-perform the Avantis Equity. In addition to that, Ab Global is 1.15 times more volatile than Avantis Equity. It trades about -0.15 of its total potential returns per unit of risk. Avantis Equity is currently generating about 0.07 per unit of volatility. If you would invest  1,895  in Avantis Equity on September 16, 2024 and sell it today you would earn a total of  16.00  from holding Avantis Equity or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ab Global Real  vs.  Avantis Equity

Ab Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

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

Avantis Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Avantis Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ab Global and Avantis Equity

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

The idea behind Ab Global Real and Avantis Equity 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.