Correlation Between Ab Equity and Bond Fund

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

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

Diversification Opportunities for Ab Equity and Bond Fund

0.74

Correlation Coefficient

Ab Equity  Bond Fund

Poor diversification

The 3 months correlation between AUIAX and Bond is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ab Equity Income and Bond Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Fund and Ab Equity 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 Equity Income are associated (or correlated) with Bond Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Fund has no effect on the direction of Ab Equity i.e., Ab Equity and Bond Fund go up and down completely randomly.

Pair Corralation between Ab Equity and Bond Fund

Assuming the 90 days horizon Ab Equity Income is expected to generate 2.32 times more return on investment than Bond Fund. However, Ab Equity is 2.32 times more volatile than Bond Fund Of. It trades about 0.22 of its potential returns per unit of risk. Bond Fund Of is currently generating about 0.02 per unit of risk. If you would invest  3,286  in Ab Equity Income on October 26, 2024 and sell it today you would earn a total of  94.00  from holding Ab Equity Income or generate 2.86% return on investment over 90 days.

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

Ab Equity Income  vs.  Bond Fund Of

Ab Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bond Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ab Equity and Bond Fund

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

The idea behind Ab Equity Income and Bond Fund Of 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.