Correlation Between Specialized Technology and Ab Large

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

By analyzing existing cross correlation between Specialized Technology Fund and Ab Large Cap, you can compare the effects of market volatilities on Specialized Technology and Ab Large 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 Specialized Technology with a short position of Ab Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Specialized Technology and Ab Large.

Diversification Opportunities for Specialized Technology and Ab Large

0.93

Correlation Coefficient

Specialized Technology  Ab Large

Almost no diversification

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

Pair Corralation between Specialized Technology and Ab Large

Assuming the 90 days horizon Specialized Technology is expected to generate 1.16 times less return on investment than Ab Large. In addition to that, Specialized Technology is 1.03 times more volatile than Ab Large Cap. It trades about 0.06 of its total potential returns per unit of risk. Ab Large Cap is currently generating about 0.07 per unit of volatility. If you would invest  6,434  in Ab Large Cap on October 24, 2024 and sell it today you would earn a total of  2,676  from holding Ab Large Cap or generate 41.59% return on investment over 90 days.

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

Specialized Technology Fund  vs.  Ab Large Cap

Specialized Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ab Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Specialized Technology and Ab Large

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

The idea behind Specialized Technology Fund and Ab Large Cap 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.