Correlation Between Ab Select and Stocksplus

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

Diversification Opportunities for Ab Select and Stocksplus

-0.84

Correlation Coefficient

Ab Select  Stocksplus

Pay attention - limited upside

The 3 months correlation between AUUYX and Stocksplus is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Equity and Stocksplus Tr Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stocksplus Tr Short 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 Stocksplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stocksplus Tr Short has no effect on the direction of Ab Select i.e., Ab Select and Stocksplus go up and down completely randomly.

Pair Corralation between Ab Select and Stocksplus

Assuming the 90 days horizon Ab Select Equity is expected to under-perform the Stocksplus. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ab Select Equity is 1.11 times less risky than Stocksplus. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Stocksplus Tr Short is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  702.00  in Stocksplus Tr Short on December 21, 2024 and sell it today you would earn a total of  58.00  from holding Stocksplus Tr Short or generate 8.26% return on investment over 90 days.

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

Ab Select Equity  vs.  Stocksplus Tr Short

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 fairly strong basic indicators, Ab Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stocksplus Tr Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stocksplus Tr Short are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Stocksplus may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ab Select and Stocksplus

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

The idea behind Ab Select Equity and Stocksplus Tr Short 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.