Correlation Between Ab New and Total Income

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

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

Diversification Opportunities for Ab New and Total Income

-0.52

Correlation Coefficient

Ab New  Total Income

Excellent diversification

The 3 months correlation between ALNVX and Total is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ab New York and Total Income Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Income Real and Ab New 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 New York are associated (or correlated) with Total Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Income Real has no effect on the direction of Ab New i.e., Ab New and Total Income go up and down completely randomly.

Pair Corralation between Ab New and Total Income

Assuming the 90 days horizon Ab New York is expected to generate 2.67 times more return on investment than Total Income. However, Ab New is 2.67 times more volatile than Total Income Real. It trades about 0.03 of its potential returns per unit of risk. Total Income Real is currently generating about -0.1 per unit of risk. If you would invest  924.00  in Ab New York on October 26, 2024 and sell it today you would earn a total of  1.00  from holding Ab New York or generate 0.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Ab New York  vs.  Total Income Real

Ab New York

Risk-Adjusted Performance

0 of 100

Very Weak

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

Total Income Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Income Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Total Income 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 New and Total Income

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

The idea behind Ab New York and Total Income Real 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.