Correlation Between Ab National and Ab New

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

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

Diversification Opportunities for Ab National and Ab New

0.99

Correlation Coefficient

Ab National  Ab New

No risk reduction

The 3 months correlation between ALTHX and ANJAX is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Ab National Portfolio and Ab New Jersey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab New Jersey and Ab National 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 National Portfolio are associated (or correlated) with Ab New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab New Jersey has no effect on the direction of Ab National i.e., Ab National and Ab New go up and down completely randomly.

Pair Corralation between Ab National and Ab New

Assuming the 90 days horizon Ab National Portfolio is expected to under-perform the Ab New. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab National Portfolio is 1.04 times less risky than Ab New. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Ab New Jersey is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  903.00  in Ab New Jersey on December 28, 2024 and sell it today you would lose (3.00) from holding Ab New Jersey or give up 0.33% of portfolio value over 90 days.

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

Ab National Portfolio  vs.  Ab New Jersey

Ab National Portfolio

Risk-Adjusted Performance

Very Weak

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

Ab New Jersey

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab New Jersey 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.

Pair Trading with Ab National and Ab New

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

The idea behind Ab National Portfolio and Ab New Jersey 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.