Correlation Between Ab Minnesota and Ab Virginia

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

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

Diversification Opportunities for Ab Minnesota and Ab Virginia

0.88

Correlation Coefficient

Ab Minnesota  Ab Virginia

Very poor diversification

The 3 months correlation between AMNAX and AVACX is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ab Minnesota Portfolio and Ab Virginia Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Virginia Portfolio and Ab Minnesota 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 Minnesota Portfolio are associated (or correlated) with Ab Virginia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Virginia Portfolio has no effect on the direction of Ab Minnesota i.e., Ab Minnesota and Ab Virginia go up and down completely randomly.

Pair Corralation between Ab Minnesota and Ab Virginia

Assuming the 90 days horizon Ab Minnesota Portfolio is expected to under-perform the Ab Virginia. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab Minnesota Portfolio is 1.06 times less risky than Ab Virginia. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Ab Virginia Portfolio is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,032  in Ab Virginia Portfolio on December 28, 2024 and sell it today you would lose (3.00) from holding Ab Virginia Portfolio or give up 0.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Ab Minnesota Portfolio  vs.  Ab Virginia Portfolio

Ab Minnesota Portfolio

Risk-Adjusted Performance

Very Weak

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

Ab Virginia Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Virginia Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Ab Virginia 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 Minnesota and Ab Virginia

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

The idea behind Ab Minnesota Portfolio and Ab Virginia Portfolio 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.