Correlation Between Stellar and AB High

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

By analyzing existing cross correlation between Stellar and AB High Dividend, you can compare the effects of market volatilities on Stellar and AB High 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 Stellar with a short position of AB High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and AB High.

Diversification Opportunities for Stellar and AB High

0.41

Correlation Coefficient

Stellar  AB High

Very weak diversification

The 3 months correlation between Stellar and HIDV is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and AB High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB High Dividend and Stellar 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 Stellar are associated (or correlated) with AB High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB High Dividend has no effect on the direction of Stellar i.e., Stellar and AB High go up and down completely randomly.

Pair Corralation between Stellar and AB High

Assuming the 90 days trading horizon Stellar is expected to generate 9.77 times more return on investment than AB High. However, Stellar is 9.77 times more volatile than AB High Dividend. It trades about 0.1 of its potential returns per unit of risk. AB High Dividend is currently generating about 0.11 per unit of risk. If you would invest  9.29  in Stellar on October 25, 2024 and sell it today you would earn a total of  33.71  from holding Stellar or generate 362.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	64.15%
Values	Daily Returns

Stellar  vs.  AB High Dividend

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

AB High Dividend

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB High Dividend are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, AB High is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Stellar and AB High

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

The idea behind Stellar and AB High Dividend 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.