Correlation Between Ab All and Ab Growth

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

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

Diversification Opportunities for Ab All and Ab Growth

0.71

Correlation Coefficient

Ab All  Ab Growth

Poor diversification

The 3 months correlation between AMTAX and AGRFX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ab All Market and Ab Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Growth Fund and Ab All 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 All Market are associated (or correlated) with Ab Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Growth Fund has no effect on the direction of Ab All i.e., Ab All and Ab Growth go up and down completely randomly.

Pair Corralation between Ab All and Ab Growth

Assuming the 90 days horizon Ab All is expected to generate 7.52 times less return on investment than Ab Growth. But when comparing it to its historical volatility, Ab All Market is 1.82 times less risky than Ab Growth. It trades about 0.01 of its potential returns per unit of risk. Ab Growth Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,242  in Ab Growth Fund on October 5, 2024 and sell it today you would earn a total of  2,798  from holding Ab Growth Fund or generate 33.95% return on investment over 90 days.

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

Ab All Market  vs.  Ab Growth Fund

Ab All Market

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ab Growth Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ab All and Ab Growth

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

The idea behind Ab All Market and Ab Growth Fund 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.