Correlation Between Ab Global and Ultrashort Small-cap

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

Diversification Opportunities for Ab Global and Ultrashort Small-cap

-0.11

Correlation Coefficient

Ab Global  Ultrashort Small-cap

Good diversification

The 3 months correlation between CABIX and Ultrashort is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk and Ultrashort Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Small Cap 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 Ultrashort Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Small Cap has no effect on the direction of Ab Global i.e., Ab Global and Ultrashort Small-cap go up and down completely randomly.

Pair Corralation between Ab Global and Ultrashort Small-cap

Assuming the 90 days horizon Ab Global Risk is expected to generate 0.32 times more return on investment than Ultrashort Small-cap. However, Ab Global Risk is 3.08 times less risky than Ultrashort Small-cap. It trades about -0.01 of its potential returns per unit of risk. Ultrashort Small Cap Profund is currently generating about -0.02 per unit of risk. If you would invest  1,620  in Ab Global Risk on October 4, 2024 and sell it today you would lose (110.00) from holding Ab Global Risk or give up 6.79% of portfolio value over 90 days.

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

Ab Global Risk  vs.  Ultrashort Small Cap Profund

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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ultrashort Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultrashort Small Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ultrashort Small-cap 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 Global and Ultrashort Small-cap

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

The idea behind Ab Global Risk and Ultrashort Small Cap Profund 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.