Correlation Between Allianzgi Mid-cap and Fabxx

Can any of the company-specific risk be diversified away by investing in both Allianzgi Mid-cap and Fabxx 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 Allianzgi Mid-cap and Fabxx into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Allianzgi Mid-cap and Fabxx

-0.14

Correlation Coefficient

Allianzgi Mid-cap  Fabxx

Good diversification

The 3 months correlation between Allianzgi and Fabxx is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Allianzgi Mid Cap Fund and Fabxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabxx and Allianzgi Mid-cap 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 Allianzgi Mid Cap Fund are associated (or correlated) with Fabxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabxx has no effect on the direction of Allianzgi Mid-cap i.e., Allianzgi Mid-cap and Fabxx go up and down completely randomly.

Pair Corralation between Allianzgi Mid-cap and Fabxx

Assuming the 90 days horizon Allianzgi Mid Cap Fund is expected to generate 0.13 times more return on investment than Fabxx. However, Allianzgi Mid Cap Fund is 7.68 times less risky than Fabxx. It trades about -0.07 of its potential returns per unit of risk. Fabxx is currently generating about -0.03 per unit of risk. If you would invest  458.00  in Allianzgi Mid Cap Fund on December 30, 2024 and sell it today you would lose (37.00) from holding Allianzgi Mid Cap Fund or give up 8.08% of portfolio value over 90 days.

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

Allianzgi Mid Cap Fund  vs.  Fabxx

Allianzgi Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allianzgi Mid Cap Fund 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.

Fabxx

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fabxx has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Allianzgi Mid-cap and Fabxx

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

The idea behind Allianzgi Mid Cap Fund and Fabxx 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.