Correlation Between Ab Large and Diversified Municipal

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

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

Diversification Opportunities for Ab Large and Diversified Municipal

-0.42

Correlation Coefficient

Ab Large  Diversified Municipal

Very good diversification

The 3 months correlation between APGCX and Diversified is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ab Large Cap and Diversified Municipal Portfoli in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Municipal and Ab Large 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 Large Cap are associated (or correlated) with Diversified Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Municipal has no effect on the direction of Ab Large i.e., Ab Large and Diversified Municipal go up and down completely randomly.

Pair Corralation between Ab Large and Diversified Municipal

Assuming the 90 days horizon Ab Large Cap is expected to generate 5.93 times more return on investment than Diversified Municipal. However, Ab Large is 5.93 times more volatile than Diversified Municipal Portfolio. It trades about 0.16 of its potential returns per unit of risk. Diversified Municipal Portfolio is currently generating about 0.03 per unit of risk. If you would invest  6,084  in Ab Large Cap on August 31, 2024 and sell it today you would earn a total of  555.00  from holding Ab Large Cap or generate 9.12% return on investment over 90 days.

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

Ab Large Cap  vs.  Diversified Municipal Portfoli

Ab Large Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Large Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ab Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Diversified Municipal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Municipal Portfolio are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Diversified Municipal 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 Large and Diversified Municipal

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

The idea behind Ab Large Cap and Diversified Municipal 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .