Correlation Between Ab Small and Preferred Securities

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

By analyzing existing cross correlation between Ab Small Cap and Preferred Securities Fund, you can compare the effects of market volatilities on Ab Small and Preferred Securities 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 Ab Small with a short position of Preferred Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Preferred Securities.

Diversification Opportunities for Ab Small and Preferred Securities

0.52

Correlation Coefficient

Ab Small  Preferred Securities

Very weak diversification

The 3 months correlation between QUAIX and Preferred is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Preferred Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Securities and Ab Small 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 Ab Small Cap are associated (or correlated) with Preferred Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Securities has no effect on the direction of Ab Small i.e., Ab Small and Preferred Securities go up and down completely randomly.

Pair Corralation between Ab Small and Preferred Securities

Assuming the 90 days horizon Ab Small Cap is expected to generate 7.12 times more return on investment than Preferred Securities. However, Ab Small is 7.12 times more volatile than Preferred Securities Fund. It trades about 0.06 of its potential returns per unit of risk. Preferred Securities Fund is currently generating about 0.21 per unit of risk. If you would invest  5,715  in Ab Small Cap on November 3, 2024 and sell it today you would earn a total of  1,959  from holding Ab Small Cap or generate 34.28% return on investment over 90 days.

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

Ab Small Cap  vs.  Preferred Securities Fund

Ab Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ab Small may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Preferred Securities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Securities Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Preferred Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Small and Preferred Securities

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

The idea behind Ab Small Cap and Preferred Securities Fund 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.