Correlation Between American High and Alliancebernstein

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

By analyzing existing cross correlation between American High Income Municipal and Alliancebernstein National Municipalome, you can compare the effects of market volatilities on American High and Alliancebernstein 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 American High with a short position of Alliancebernstein. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High and Alliancebernstein.

Diversification Opportunities for American High and Alliancebernstein

0.5

Correlation Coefficient

American High  Alliancebernstein

Very weak diversification

The 3 months correlation between American and Alliancebernstein is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Alliancebernstein National Mun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliancebernstein and American High 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 American High Income Municipal are associated (or correlated) with Alliancebernstein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliancebernstein has no effect on the direction of American High i.e., American High and Alliancebernstein go up and down completely randomly.

Pair Corralation between American High and Alliancebernstein

Assuming the 90 days horizon American High Income Municipal is expected to generate 0.55 times more return on investment than Alliancebernstein. However, American High Income Municipal is 1.83 times less risky than Alliancebernstein. It trades about 0.06 of its potential returns per unit of risk. Alliancebernstein National Municipalome is currently generating about -0.06 per unit of risk. If you would invest  1,510  in American High Income Municipal on December 26, 2024 and sell it today you would earn a total of  13.00  from holding American High Income Municipal or generate 0.86% return on investment over 90 days.

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

American High Income Municipal  vs.  Alliancebernstein National Mun

American High Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American High Income Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, American High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alliancebernstein

Risk-Adjusted Performance

Very Weak

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

Pair Trading with American High and Alliancebernstein

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

The idea behind American High Income Municipal and Alliancebernstein National Municipalome 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.