Correlation Between Strategic Allocation: and Ab Select

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

By analyzing existing cross correlation between Strategic Allocation Moderate and Ab Select Equity, you can compare the effects of market volatilities on Strategic Allocation: and Ab Select 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 Strategic Allocation: with a short position of Ab Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation: and Ab Select.

Diversification Opportunities for Strategic Allocation: and Ab Select

0.93

Correlation Coefficient

Strategic Allocation:  Ab Select

Almost no diversification

The 3 months correlation between Strategic and AUUIX is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Ab Select Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Select Equity and Strategic Allocation: 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 Strategic Allocation Moderate are associated (or correlated) with Ab Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Select Equity has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Ab Select go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Ab Select

Assuming the 90 days horizon Strategic Allocation Moderate is expected to generate 0.64 times more return on investment than Ab Select. However, Strategic Allocation Moderate is 1.55 times less risky than Ab Select. It trades about -0.01 of its potential returns per unit of risk. Ab Select Equity is currently generating about -0.05 per unit of risk. If you would invest  639.00  in Strategic Allocation Moderate on December 30, 2024 and sell it today you would lose (2.00) from holding Strategic Allocation Moderate or give up 0.31% of portfolio value over 90 days.

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

Strategic Allocation Moderate  vs.  Ab Select Equity

Strategic Allocation:

Risk-Adjusted Performance

Very Weak

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

Ab Select Equity

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Strategic Allocation: and Ab Select

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

The idea behind Strategic Allocation Moderate and Ab Select Equity 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.