Correlation Between Select Fund and Ab Select

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

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

Diversification Opportunities for Select Fund and Ab Select

0.09

Correlation Coefficient

Select Fund  Ab Select

Significant diversification

The 3 months correlation between Select and AUUCX is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Select Fund R 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 Select Fund 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 Select Fund R 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 Select Fund i.e., Select Fund and Ab Select go up and down completely randomly.

Pair Corralation between Select Fund and Ab Select

Assuming the 90 days horizon Select Fund R is expected to generate 1.31 times more return on investment than Ab Select. However, Select Fund is 1.31 times more volatile than Ab Select Equity. It trades about 0.09 of its potential returns per unit of risk. Ab Select Equity is currently generating about 0.09 per unit of risk. If you would invest  7,597  in Select Fund R on October 5, 2024 and sell it today you would earn a total of  3,596  from holding Select Fund R or generate 47.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Select Fund R  vs.  Ab Select Equity

Select Fund R

Risk-Adjusted Performance

2 of 100

Weak

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

0 of 100

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 fundamental 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 Select Fund and Ab Select

The main advantage of trading using opposite Select Fund and Ab Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Fund 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 Select Fund R 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.

Check out your portfolio center.

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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..