Correlation Between Sp 500 and Ab Bond

Can any of the company-specific risk be diversified away by investing in both Sp 500 and Ab Bond 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 Sp 500 and Ab Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp 500 Equal and Ab Bond Inflation, you can compare the effects of market volatilities on Sp 500 and Ab Bond 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 Sp 500 with a short position of Ab Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Ab Bond.

Diversification Opportunities for Sp 500 and Ab Bond

-0.6

Correlation Coefficient

Sp 500  Ab Bond

Excellent diversification

The 3 months correlation between INDEX and ABNCX is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Equal and Ab Bond Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Bond Inflation and Sp 500 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 Sp 500 Equal are associated (or correlated) with Ab Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Bond Inflation has no effect on the direction of Sp 500 i.e., Sp 500 and Ab Bond go up and down completely randomly.

Pair Corralation between Sp 500 and Ab Bond

Assuming the 90 days horizon Sp 500 Equal is expected to generate 3.73 times more return on investment than Ab Bond. However, Sp 500 is 3.73 times more volatile than Ab Bond Inflation. It trades about 0.19 of its potential returns per unit of risk. Ab Bond Inflation is currently generating about -0.07 per unit of risk. If you would invest  5,338  in Sp 500 Equal on September 12, 2024 and sell it today you would earn a total of  433.00  from holding Sp 500 Equal or generate 8.11% return on investment over 90 days.

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

Sp 500 Equal  vs.  Ab Bond Inflation

Sp 500 Equal

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sp 500 Equal are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sp 500 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ab Bond Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sp 500 and Ab Bond

The main advantage of trading using opposite Sp 500 and Ab Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Ab Bond 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 Bond will offset losses from the drop in Ab Bond's long position.

The idea behind Sp 500 Equal and Ab Bond Inflation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.