Correlation Between World Energy and Ab Pennsylvania

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

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

Diversification Opportunities for World Energy and Ab Pennsylvania

0.08

Correlation Coefficient

World Energy  Ab Pennsylvania

Significant diversification

The 3 months correlation between WORLD and APACX is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Ab Pennsylvania Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Pennsylvania Portfolio and World Energy 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 World Energy Fund are associated (or correlated) with Ab Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Pennsylvania Portfolio has no effect on the direction of World Energy i.e., World Energy and Ab Pennsylvania go up and down completely randomly.

Pair Corralation between World Energy and Ab Pennsylvania

Assuming the 90 days horizon World Energy Fund is expected to under-perform the Ab Pennsylvania. In addition to that, World Energy is 7.24 times more volatile than Ab Pennsylvania Portfolio. It trades about -0.08 of its total potential returns per unit of risk. Ab Pennsylvania Portfolio is currently generating about -0.01 per unit of volatility. If you would invest  982.00  in Ab Pennsylvania Portfolio on November 29, 2024 and sell it today you would lose (2.00) from holding Ab Pennsylvania Portfolio or give up 0.2% of portfolio value over 90 days.

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

World Energy Fund  vs.  Ab Pennsylvania Portfolio

World Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days World Energy 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.

Ab Pennsylvania Portfolio

Risk-Adjusted Performance

Very Weak

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

Pair Trading with World Energy and Ab Pennsylvania

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

The idea behind World Energy Fund and Ab Pennsylvania 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.