Correlation Between European Equity and Alliancebernstein

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

By analyzing existing cross correlation between European Equity Closed and Alliancebernstein Global High, you can compare the effects of market volatilities on European Equity and Alliancebernstein 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 European Equity with a short position of Alliancebernstein. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Equity and Alliancebernstein.

Diversification Opportunities for European Equity and Alliancebernstein

0.7

Correlation Coefficient

European Equity  Alliancebernstein

Poor diversification

The 3 months correlation between European and Alliancebernstein is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding European Equity Closed and Alliancebernstein Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliancebernstein and European Equity 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 European Equity Closed are associated (or correlated) with Alliancebernstein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliancebernstein has no effect on the direction of European Equity i.e., European Equity and Alliancebernstein go up and down completely randomly.

Pair Corralation between European Equity and Alliancebernstein

Considering the 90-day investment horizon European Equity is expected to generate 2.17 times less return on investment than Alliancebernstein. In addition to that, European Equity is 1.5 times more volatile than Alliancebernstein Global High. It trades about 0.04 of its total potential returns per unit of risk. Alliancebernstein Global High is currently generating about 0.12 per unit of volatility. If you would invest  870.00  in Alliancebernstein Global High on September 26, 2024 and sell it today you would earn a total of  196.00  from holding Alliancebernstein Global High or generate 22.53% return on investment over 90 days.

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

European Equity Closed  vs.  Alliancebernstein Global High

European Equity Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Equity Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Alliancebernstein

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliancebernstein Global High has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Alliancebernstein is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with European Equity and Alliancebernstein

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

The idea behind European Equity Closed and Alliancebernstein Global High 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.