Correlation Between Ab Sustainable and Ab Relative

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

By analyzing existing cross correlation between Ab Sustainable Thematic and Ab Relative Value, you can compare the effects of market volatilities on Ab Sustainable and Ab Relative 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 Sustainable with a short position of Ab Relative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Sustainable and Ab Relative.

Diversification Opportunities for Ab Sustainable and Ab Relative

0.8

Correlation Coefficient

Ab Sustainable  Ab Relative

Very poor diversification

The 3 months correlation between SUTZX and CBBYX is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ab Sustainable Thematic and Ab Relative Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Relative Value and Ab Sustainable 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 Sustainable Thematic are associated (or correlated) with Ab Relative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Relative Value has no effect on the direction of Ab Sustainable i.e., Ab Sustainable and Ab Relative go up and down completely randomly.

Pair Corralation between Ab Sustainable and Ab Relative

Assuming the 90 days horizon Ab Sustainable Thematic is expected to under-perform the Ab Relative. In addition to that, Ab Sustainable is 1.76 times more volatile than Ab Relative Value. It trades about -0.26 of its total potential returns per unit of risk. Ab Relative Value is currently generating about -0.3 per unit of volatility. If you would invest  725.00  in Ab Relative Value on September 21, 2024 and sell it today you would lose (101.00) from holding Ab Relative Value or give up 13.93% of portfolio value over 90 days.

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

Ab Sustainable Thematic  vs.  Ab Relative Value

Ab Sustainable Thematic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Sustainable Thematic 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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ab Relative Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Relative Value 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 Sustainable and Ab Relative

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

The idea behind Ab Sustainable Thematic and Ab Relative Value 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.