Correlation Between Ab Select and Ultrashort Japan

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

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

Diversification Opportunities for Ab Select and Ultrashort Japan

-0.47

Correlation Coefficient

Ab Select  Ultrashort Japan

Very good diversification

The 3 months correlation between ASCLX and Ultrashort is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Longshort and Ultrashort Japan Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Japan Profund and Ab Select 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 Select Longshort are associated (or correlated) with Ultrashort Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Japan Profund has no effect on the direction of Ab Select i.e., Ab Select and Ultrashort Japan go up and down completely randomly.

Pair Corralation between Ab Select and Ultrashort Japan

Assuming the 90 days horizon Ab Select Longshort is expected to under-perform the Ultrashort Japan. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab Select Longshort is 4.16 times less risky than Ultrashort Japan. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Ultrashort Japan Profund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,900  in Ultrashort Japan Profund on December 30, 2024 and sell it today you would earn a total of  581.00  from holding Ultrashort Japan Profund or generate 14.9% return on investment over 90 days.

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

Ab Select Longshort  vs.  Ultrashort Japan Profund

Ab Select Longshort

Risk-Adjusted Performance

Very Weak

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

Ultrashort Japan Profund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Japan Profund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort Japan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ab Select and Ultrashort Japan

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

The idea behind Ab Select Longshort and Ultrashort Japan Profund 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.