Correlation Between Russell 2000 and Ab Conservative

Can any of the company-specific risk be diversified away by investing in both Russell 2000 and Ab Conservative 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 Russell 2000 and Ab Conservative into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Russell 2000 2x and Ab Servative Wealth, you can compare the effects of market volatilities on Russell 2000 and Ab Conservative 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 Russell 2000 with a short position of Ab Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Ab Conservative.

Diversification Opportunities for Russell 2000 and Ab Conservative

0.38

Correlation Coefficient

Russell 2000  Ab Conservative

Weak diversification

The 3 months correlation between Russell and ABPYX is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 2x and Ab Servative Wealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Servative Wealth and Russell 2000 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 Russell 2000 2x are associated (or correlated) with Ab Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Servative Wealth has no effect on the direction of Russell 2000 i.e., Russell 2000 and Ab Conservative go up and down completely randomly.

Pair Corralation between Russell 2000 and Ab Conservative

Assuming the 90 days horizon Russell 2000 2x is expected to under-perform the Ab Conservative. In addition to that, Russell 2000 is 4.07 times more volatile than Ab Servative Wealth. It trades about -0.35 of its total potential returns per unit of risk. Ab Servative Wealth is currently generating about -0.36 per unit of volatility. If you would invest  1,282  in Ab Servative Wealth on October 4, 2024 and sell it today you would lose (62.00) from holding Ab Servative Wealth or give up 4.84% of portfolio value over 90 days.

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

Russell 2000 2x  vs.  Ab Servative Wealth

Russell 2000 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Russell 2000 2x has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Russell 2000 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Servative Wealth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Russell 2000 and Ab Conservative

The main advantage of trading using opposite Russell 2000 and Ab Conservative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 position performs unexpectedly, Ab Conservative 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 Conservative will offset losses from the drop in Ab Conservative's long position.

The idea behind Russell 2000 2x and Ab Servative Wealth 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.