Correlation Between Ab Tax and IShares Short

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

By analyzing existing cross correlation between Ab Tax Aware Short and iShares Short Term National, you can compare the effects of market volatilities on Ab Tax and IShares Short 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 Tax with a short position of IShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Tax and IShares Short.

Diversification Opportunities for Ab Tax and IShares Short

0.93

Correlation Coefficient

Ab Tax  IShares Short

Almost no diversification

The 3 months correlation between TAFI and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ab Tax Aware Short and iShares Short Term National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Term and Ab Tax 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 Tax Aware Short are associated (or correlated) with IShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Term has no effect on the direction of Ab Tax i.e., Ab Tax and IShares Short go up and down completely randomly.

Pair Corralation between Ab Tax and IShares Short

Given the investment horizon of 90 days Ab Tax Aware Short is expected to generate 1.5 times more return on investment than IShares Short. However, Ab Tax is 1.5 times more volatile than iShares Short Term National. It trades about 0.11 of its potential returns per unit of risk. iShares Short Term National is currently generating about 0.12 per unit of risk. If you would invest  2,483  in Ab Tax Aware Short on December 27, 2024 and sell it today you would earn a total of  21.00  from holding Ab Tax Aware Short or generate 0.85% return on investment over 90 days.

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

Ab Tax Aware Short  vs.  iShares Short Term National

Ab Tax Aware

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Tax Aware Short are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Ab Tax is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

iShares Short Term

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Term National are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Tax and IShares Short

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

The idea behind Ab Tax Aware Short and iShares Short Term National 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.