Correlation Between James Balanced: and Ab Select

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

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

Diversification Opportunities for James Balanced: and Ab Select

0.87

Correlation Coefficient

James Balanced:  Ab Select

Very poor diversification

The 3 months correlation between James and ASCLX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding James Balanced Golden and Ab Select Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Select Longshort and James Balanced: 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 James Balanced Golden 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 Longshort has no effect on the direction of James Balanced: i.e., James Balanced: and Ab Select go up and down completely randomly.

Pair Corralation between James Balanced: and Ab Select

Assuming the 90 days horizon James Balanced: is expected to generate 1.1 times less return on investment than Ab Select. But when comparing it to its historical volatility, James Balanced Golden is 1.28 times less risky than Ab Select. It trades about 0.08 of its potential returns per unit of risk. Ab Select Longshort is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,084  in Ab Select Longshort on October 24, 2024 and sell it today you would earn a total of  229.00  from holding Ab Select Longshort or generate 21.13% return on investment over 90 days.

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

James Balanced Golden  vs.  Ab Select Longshort

James Balanced Golden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James Balanced Golden has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, James Balanced: is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Select Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Select Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential 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 James Balanced: and Ab Select

The main advantage of trading using opposite James Balanced: and Ab Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Balanced: 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 James Balanced Golden and Ab Select Longshort 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 Global Correlations module to find global opportunities by holding instruments from different markets.