Correlation Between Ab Select and Absolute Capital

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

By analyzing existing cross correlation between Ab Select Equity and Absolute Capital Opportunities, you can compare the effects of market volatilities on Ab Select and Absolute Capital 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 Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Select and Absolute Capital.

Diversification Opportunities for Ab Select and Absolute Capital

0.32

Correlation Coefficient

Ab Select  Absolute Capital

Weak diversification

The 3 months correlation between AUUIX and Absolute is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Equity and Absolute Capital Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Opp 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 Equity are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Opp has no effect on the direction of Ab Select i.e., Ab Select and Absolute Capital go up and down completely randomly.

Pair Corralation between Ab Select and Absolute Capital

Assuming the 90 days horizon Ab Select is expected to generate 1.04 times less return on investment than Absolute Capital. In addition to that, Ab Select is 2.74 times more volatile than Absolute Capital Opportunities. It trades about 0.02 of its total potential returns per unit of risk. Absolute Capital Opportunities is currently generating about 0.06 per unit of volatility. If you would invest  1,024  in Absolute Capital Opportunities on September 15, 2024 and sell it today you would earn a total of  26.00  from holding Absolute Capital Opportunities or generate 2.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Ab Select Equity  vs.  Absolute Capital Opportunities

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 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.

Absolute Capital Opp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Opportunities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Capital 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 Select and Absolute Capital

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

The idea behind Ab Select Equity and Absolute Capital Opportunities 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .