Correlation Between Ab Concentrated and Ab Small

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

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

Diversification Opportunities for Ab Concentrated and Ab Small

0.79

Correlation Coefficient

Ab Concentrated  Ab Small

Poor diversification

The 3 months correlation between WPSIX and QUAYX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ab Centrated Growth and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Ab Concentrated 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 Centrated Growth are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Ab Concentrated i.e., Ab Concentrated and Ab Small go up and down completely randomly.

Pair Corralation between Ab Concentrated and Ab Small

Assuming the 90 days horizon Ab Centrated Growth is expected to generate 0.55 times more return on investment than Ab Small. However, Ab Centrated Growth is 1.81 times less risky than Ab Small. It trades about -0.04 of its potential returns per unit of risk. Ab Small Cap is currently generating about -0.11 per unit of risk. If you would invest  5,295  in Ab Centrated Growth on December 28, 2024 and sell it today you would lose (139.00) from holding Ab Centrated Growth or give up 2.63% of portfolio value over 90 days.

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

Ab Centrated Growth  vs.  Ab Small Cap

Ab Centrated Growth

Risk-Adjusted Performance

Very Weak

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

Ab Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Small Cap 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 Concentrated and Ab Small

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

The idea behind Ab Centrated Growth and Ab Small 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.