Correlation Between The Arbitrage and Ab Bond

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

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

Diversification Opportunities for The Arbitrage and Ab Bond

0.84

Correlation Coefficient

The Arbitrage  Ab Bond

Very poor diversification

The 3 months correlation between The and ANBIX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Arbitrage Fund and Ab Bond Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Bond Inflation and The Arbitrage 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 The Arbitrage Fund are associated (or correlated) with Ab Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Bond Inflation has no effect on the direction of The Arbitrage i.e., The Arbitrage and Ab Bond go up and down completely randomly.

Pair Corralation between The Arbitrage and Ab Bond

Assuming the 90 days horizon The Arbitrage is expected to generate 1.62 times less return on investment than Ab Bond. But when comparing it to its historical volatility, The Arbitrage Fund is 1.01 times less risky than Ab Bond. It trades about 0.1 of its potential returns per unit of risk. Ab Bond Inflation is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,039  in Ab Bond Inflation on December 29, 2024 and sell it today you would earn a total of  7.00  from holding Ab Bond Inflation or generate 0.67% return on investment over 90 days.

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

The Arbitrage Fund  vs.  Ab Bond Inflation

The Arbitrage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, The Arbitrage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Bond Inflation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Bond Inflation are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Bond is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Arbitrage and Ab Bond

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

The idea behind The Arbitrage Fund and Ab Bond Inflation 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.