Correlation Between Ab Municipal and Cliffwater Corporate

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

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

Diversification Opportunities for Ab Municipal and Cliffwater Corporate

-0.13

Correlation Coefficient

Ab Municipal  Cliffwater Corporate

Good diversification

The 3 months correlation between AUNTX and Cliffwater is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ab Municipal Bond and Cliffwater Corporate Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cliffwater Corporate and Ab Municipal 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 Municipal Bond are associated (or correlated) with Cliffwater Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cliffwater Corporate has no effect on the direction of Ab Municipal i.e., Ab Municipal and Cliffwater Corporate go up and down completely randomly.

Pair Corralation between Ab Municipal and Cliffwater Corporate

Assuming the 90 days horizon Ab Municipal Bond is expected to generate 0.4 times more return on investment than Cliffwater Corporate. However, Ab Municipal Bond is 2.5 times less risky than Cliffwater Corporate. It trades about -0.11 of its potential returns per unit of risk. Cliffwater Corporate Lending is currently generating about -0.06 per unit of risk. If you would invest  1,075  in Ab Municipal Bond on October 9, 2024 and sell it today you would lose (8.00) from holding Ab Municipal Bond or give up 0.74% of portfolio value over 90 days.

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

Ab Municipal Bond  vs.  Cliffwater Corporate Lending

Ab Municipal Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cliffwater Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cliffwater Corporate Lending has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Cliffwater Corporate 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 Municipal and Cliffwater Corporate

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

The idea behind Ab Municipal Bond and Cliffwater Corporate Lending 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.