Correlation Between Litman Gregory and Ab All

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

By analyzing existing cross correlation between Litman Gregory Masters and Ab All Market, you can compare the effects of market volatilities on Litman Gregory and Ab All 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 Litman Gregory with a short position of Ab All. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litman Gregory and Ab All.

Diversification Opportunities for Litman Gregory and Ab All

-0.34

Correlation Coefficient

Litman Gregory  Ab All

Very good diversification

The 3 months correlation between Litman and AMTAX is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Litman Gregory Masters and Ab All Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab All Market and Litman Gregory 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 Litman Gregory Masters are associated (or correlated) with Ab All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab All Market has no effect on the direction of Litman Gregory i.e., Litman Gregory and Ab All go up and down completely randomly.

Pair Corralation between Litman Gregory and Ab All

Assuming the 90 days horizon Litman Gregory Masters is expected to generate 0.22 times more return on investment than Ab All. However, Litman Gregory Masters is 4.58 times less risky than Ab All. It trades about 0.19 of its potential returns per unit of risk. Ab All Market is currently generating about -0.01 per unit of risk. If you would invest  978.00  in Litman Gregory Masters on October 23, 2024 and sell it today you would earn a total of  15.00  from holding Litman Gregory Masters or generate 1.53% return on investment over 90 days.

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

Litman Gregory Masters  vs.  Ab All Market

Litman Gregory Masters

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Litman Gregory Masters are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Litman Gregory is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab All Market

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Litman Gregory and Ab All

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

The idea behind Litman Gregory Masters and Ab All Market 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.