Correlation Between International Equity and Ab Select

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

By analyzing existing cross correlation between International Equity Institutional and Ab Select Equity, you can compare the effects of market volatilities on International Equity and Ab Select 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 International Equity with a short position of Ab Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Ab Select.

Diversification Opportunities for International Equity and Ab Select

-0.22

Correlation Coefficient

International Equity  Ab Select

Very good diversification

The 3 months correlation between International and AUUIX is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Instituti and Ab Select Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Select Equity and International 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 International Equity Institutional are associated (or correlated) with Ab Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Select Equity has no effect on the direction of International Equity i.e., International Equity and Ab Select go up and down completely randomly.

Pair Corralation between International Equity and Ab Select

Assuming the 90 days horizon International Equity Institutional is expected to under-perform the Ab Select. In addition to that, International Equity is 1.01 times more volatile than Ab Select Equity. It trades about -0.12 of its total potential returns per unit of risk. Ab Select Equity is currently generating about -0.02 per unit of volatility. If you would invest  2,243  in Ab Select Equity on September 18, 2024 and sell it today you would lose (37.00) from holding Ab Select Equity or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

International Equity Instituti  vs.  Ab Select Equity

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Equity Institutional 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.

Ab Select Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Select Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ab Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Equity and Ab Select

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

The idea behind International Equity Institutional and Ab Select Equity 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.