Correlation Between Ab New and Ab Conservative

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

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

Diversification Opportunities for Ab New and Ab Conservative

0.63

Correlation Coefficient

Ab New  Ab Conservative

Poor diversification

The 3 months correlation between ANYCX and APWIX is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ab New York and Ab Servative Wealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Servative Wealth and Ab New 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 New York are associated (or correlated) with Ab Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Servative Wealth has no effect on the direction of Ab New i.e., Ab New and Ab Conservative go up and down completely randomly.

Pair Corralation between Ab New and Ab Conservative

Assuming the 90 days horizon Ab New York is expected to under-perform the Ab Conservative. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab New York is 2.47 times less risky than Ab Conservative. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Ab Servative Wealth is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,271  in Ab Servative Wealth on October 25, 2024 and sell it today you would earn a total of  3.00  from holding Ab Servative Wealth or generate 0.24% return on investment over 90 days.

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

Ab New York  vs.  Ab Servative Wealth

Ab New York

Risk-Adjusted Performance

0 of 100

Weak

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

Ab Servative Wealth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ab New and Ab Conservative

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

The idea behind Ab New York and Ab Servative Wealth 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.