Correlation Between Ab Global and World Energy

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

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

Diversification Opportunities for Ab Global and World Energy

-0.13

Correlation Coefficient

Ab Global  World Energy

Good diversification

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

Pair Corralation between Ab Global and World Energy

Assuming the 90 days horizon Ab Global is expected to generate 20.38 times less return on investment than World Energy. But when comparing it to its historical volatility, Ab Global Risk is 1.51 times less risky than World Energy. It trades about 0.0 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,200  in World Energy Fund on September 18, 2024 and sell it today you would earn a total of  269.00  from holding World Energy Fund or generate 22.42% return on investment over 90 days.

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

Ab Global Risk  vs.  World Energy Fund

Ab Global Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Global Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

World Energy

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Ab Global and World Energy

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

The idea behind Ab Global Risk and World Energy Fund 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 Commodity Directory module to find actively traded commodities issued by global exchanges.