Correlation Between Ab Select and Aquila Tax-free

Can any of the company-specific risk be diversified away by investing in both Ab Select and Aquila Tax-free 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 Aquila Tax-free 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 Aquila Tax Free Trust, you can compare the effects of market volatilities on Ab Select and Aquila Tax-free 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 Aquila Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Select and Aquila Tax-free.

Diversification Opportunities for Ab Select and Aquila Tax-free

0.64

Correlation Coefficient

Ab Select  Aquila Tax-free

Poor diversification

The 3 months correlation between AUUIX and Aquila is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Equity and Aquila Tax Free Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Tax Free 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 Aquila Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Tax Free has no effect on the direction of Ab Select i.e., Ab Select and Aquila Tax-free go up and down completely randomly.

Pair Corralation between Ab Select and Aquila Tax-free

Assuming the 90 days horizon Ab Select Equity is expected to under-perform the Aquila Tax-free. In addition to that, Ab Select is 6.11 times more volatile than Aquila Tax Free Trust. It trades about -0.09 of its total potential returns per unit of risk. Aquila Tax Free Trust is currently generating about -0.01 per unit of volatility. If you would invest  1,029  in Aquila Tax Free Trust on December 2, 2024 and sell it today you would lose (1.00) from holding Aquila Tax Free Trust or give up 0.1% of portfolio value over 90 days.

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

Ab Select Equity  vs.  Aquila Tax Free Trust

Ab Select Equity

Risk-Adjusted Performance

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 latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aquila Tax Free

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aquila Tax Free Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aquila Tax-free 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 Aquila Tax-free

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

The idea behind Ab Select Equity and Aquila Tax Free Trust 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.