Correlation Between Ab Small and Deutsche Equity

Can any of the company-specific risk be diversified away by investing in both Ab Small and Deutsche Equity 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 Deutsche Equity 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 Deutsche Equity 500, you can compare the effects of market volatilities on Ab Small and Deutsche Equity 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 Deutsche Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Deutsche Equity.

Diversification Opportunities for Ab Small and Deutsche Equity

0.46

Correlation Coefficient

Ab Small  Deutsche Equity

Very weak diversification

The 3 months correlation between QUAZX and Deutsche is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Deutsche Equity 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Equity 500 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 Deutsche Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Equity 500 has no effect on the direction of Ab Small i.e., Ab Small and Deutsche Equity go up and down completely randomly.

Pair Corralation between Ab Small and Deutsche Equity

Assuming the 90 days horizon Ab Small Cap is expected to generate 0.68 times more return on investment than Deutsche Equity. However, Ab Small Cap is 1.46 times less risky than Deutsche Equity. It trades about 0.04 of its potential returns per unit of risk. Deutsche Equity 500 is currently generating about -0.09 per unit of risk. If you would invest  7,342  in Ab Small Cap on October 9, 2024 and sell it today you would earn a total of  220.00  from holding Ab Small Cap or generate 3.0% 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.  Deutsche Equity 500

Ab Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Deutsche Equity 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Equity 500 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.

Pair Trading with Ab Small and Deutsche Equity

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

The idea behind Ab Small Cap and Deutsche Equity 500 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.