Correlation Between Ab Global and Equity Growth

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

Diversification Opportunities for Ab Global and Equity Growth

0.39

Correlation Coefficient

Ab Global  Equity Growth

Weak diversification

The 3 months correlation between CBSYX and Equity is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth 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 Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Ab Global i.e., Ab Global and Equity Growth go up and down completely randomly.

Pair Corralation between Ab Global and Equity Growth

Assuming the 90 days horizon Ab Global Risk is expected to under-perform the Equity Growth. In addition to that, Ab Global is 1.94 times more volatile than Equity Growth Fund. It trades about -0.11 of its total potential returns per unit of risk. Equity Growth Fund is currently generating about -0.04 per unit of volatility. If you would invest  3,464  in Equity Growth Fund on December 2, 2024 and sell it today you would lose (83.00) from holding Equity Growth Fund or give up 2.4% of portfolio value over 90 days.

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

Ab Global Risk  vs.  Equity Growth Fund

Ab Global Risk

Risk-Adjusted Performance

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 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.

Equity Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Equity Growth 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 Equity Growth

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

The idea behind Ab Global Risk and Equity Growth 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.