Correlation Between Ab Global and Small Capitalization

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

Diversification Opportunities for Ab Global and Small Capitalization

0.27

Correlation Coefficient

Ab Global  Small Capitalization

Modest diversification

The 3 months correlation between CABIX and Small is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization 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 Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Ab Global i.e., Ab Global and Small Capitalization go up and down completely randomly.

Pair Corralation between Ab Global and Small Capitalization

Assuming the 90 days horizon Ab Global Risk is expected to generate 0.37 times more return on investment than Small Capitalization. However, Ab Global Risk is 2.67 times less risky than Small Capitalization. It trades about 0.03 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.14 per unit of risk. If you would invest  1,510  in Ab Global Risk on December 28, 2024 and sell it today you would earn a total of  14.00  from holding Ab Global Risk or generate 0.93% return on investment over 90 days.

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

Ab Global Risk  vs.  Small Capitalization Portfolio

Ab Global Risk

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global Risk are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Capitalization Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ab Global and Small Capitalization

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

The idea behind Ab Global Risk and Small Capitalization Portfolio 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.