Correlation Between Ab Minnesota and Ab All

Can any of the company-specific risk be diversified away by investing in both Ab Minnesota and Ab All 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 All 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 All Market, you can compare the effects of market volatilities on Ab Minnesota and Ab All 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 All. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Minnesota and Ab All.

Diversification Opportunities for Ab Minnesota and Ab All

0.25

Correlation Coefficient

Ab Minnesota  Ab All

Modest diversification

The 3 months correlation between AMNCX and AMTOX is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ab Minnesota Portfolio and Ab All Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab All Market 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 All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab All Market has no effect on the direction of Ab Minnesota i.e., Ab Minnesota and Ab All go up and down completely randomly.

Pair Corralation between Ab Minnesota and Ab All

Assuming the 90 days horizon Ab Minnesota is expected to generate 5.25 times less return on investment than Ab All. But when comparing it to its historical volatility, Ab Minnesota Portfolio is 2.92 times less risky than Ab All. It trades about 0.02 of its potential returns per unit of risk. Ab All Market is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  804.00  in Ab All Market on November 28, 2024 and sell it today you would earn a total of  110.00  from holding Ab All Market or generate 13.68% return on investment over 90 days.

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

Ab Minnesota Portfolio  vs.  Ab All Market

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 fundamental 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 All Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab All Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab All 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 All

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

The idea behind Ab Minnesota Portfolio and Ab All Market 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.