Correlation Between Short-term Bond and Ab Intermediate

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

By analyzing existing cross correlation between Short Term Bond Fund and Ab Intermediate Bond, you can compare the effects of market volatilities on Short-term Bond and Ab Intermediate 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 Short-term Bond with a short position of Ab Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Bond and Ab Intermediate.

Diversification Opportunities for Short-term Bond and Ab Intermediate

0.65

Correlation Coefficient

Short-term Bond  Ab Intermediate

Poor diversification

The 3 months correlation between Short-term and ABQZX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Bond Fund and Ab Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Intermediate Bond and Short-term Bond 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 Short Term Bond Fund are associated (or correlated) with Ab Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Intermediate Bond has no effect on the direction of Short-term Bond i.e., Short-term Bond and Ab Intermediate go up and down completely randomly.

Pair Corralation between Short-term Bond and Ab Intermediate

Assuming the 90 days horizon Short Term Bond Fund is expected to generate 0.34 times more return on investment than Ab Intermediate. However, Short Term Bond Fund is 2.98 times less risky than Ab Intermediate. It trades about 0.0 of its potential returns per unit of risk. Ab Intermediate Bond is currently generating about -0.11 per unit of risk. If you would invest  908.00  in Short Term Bond Fund on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Short Term Bond Fund or generate 0.0% return on investment over 90 days.

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

Short Term Bond Fund  vs.  Ab Intermediate Bond

Short Term Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Term Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Short-term Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Intermediate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Short-term Bond and Ab Intermediate

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

The idea behind Short Term Bond Fund and Ab Intermediate Bond 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.