Correlation Between Wellington Shields and Ab Small

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

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

Diversification Opportunities for Wellington Shields and Ab Small

0.87

Correlation Coefficient

Wellington Shields  Ab Small

Very poor diversification

The 3 months correlation between Wellington and SCYVX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Wellington Shields All Cap 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 Wellington Shields 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 Wellington Shields All Cap 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 Wellington Shields i.e., Wellington Shields and Ab Small go up and down completely randomly.

Pair Corralation between Wellington Shields and Ab Small

Assuming the 90 days horizon Wellington Shields All Cap is expected to generate 0.61 times more return on investment than Ab Small. However, Wellington Shields All Cap is 1.64 times less risky than Ab Small. It trades about 0.28 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.15 per unit of risk. If you would invest  2,623  in Wellington Shields All Cap on September 5, 2024 and sell it today you would earn a total of  384.00  from holding Wellington Shields All Cap or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Wellington Shields All Cap  vs.  Ab Small Cap

Wellington Shields All

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wellington Shields All Cap are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wellington Shields showed solid returns over the last few months and may actually be approaching a breakup point.

Ab Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wellington Shields and Ab Small

The main advantage of trading using opposite Wellington Shields and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wellington Shields 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 Wellington Shields All Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.