Correlation Between Sp Midcap and Ab Core

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Can any of the company-specific risk be diversified away by investing in both Sp Midcap and Ab Core 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 Sp Midcap and Ab Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Midcap Index and Ab E Opportunities, you can compare the effects of market volatilities on Sp Midcap and Ab Core 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 Sp Midcap with a short position of Ab Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Ab Core.

Diversification Opportunities for Sp Midcap and Ab Core

SPMIXADGAXDiversified AwaySPMIXADGAXDiversified Away100%
0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between SPMIX and ADGAX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Ab E Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab E Opportunities and Sp Midcap 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 Sp Midcap Index are associated (or correlated) with Ab Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab E Opportunities has no effect on the direction of Sp Midcap i.e., Sp Midcap and Ab Core go up and down completely randomly.

Pair Corralation between Sp Midcap and Ab Core

Assuming the 90 days horizon Sp Midcap Index is expected to under-perform the Ab Core. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sp Midcap Index is 1.05 times less risky than Ab Core. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Ab E Opportunities is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,550  in Ab E Opportunities on November 18, 2024 and sell it today you would lose (131.00) from holding Ab E Opportunities or give up 5.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sp Midcap Index  vs.  Ab E Opportunities

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50
JavaScript chart by amCharts 3.21.15SPMIX ADGAX
       Timeline  
Sp Midcap Index 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sp Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2627282930
Ab E Opportunities 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ab E Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2323.52424.52525.52626.5

Sp Midcap and Ab Core Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.35-1.81-1.27-0.73-0.190.320.861.41.942.48 0.080.100.120.140.160.180.20
JavaScript chart by amCharts 3.21.15SPMIX ADGAX
       Returns  

Pair Trading with Sp Midcap and Ab Core

The main advantage of trading using opposite Sp Midcap and Ab Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap position performs unexpectedly, Ab Core 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 Core will offset losses from the drop in Ab Core's long position.
The idea behind Sp Midcap Index and Ab E Opportunities 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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