Correlation Between Ab Global and Ab Concentrated

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

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

Diversification Opportunities for Ab Global and Ab Concentrated

0.79

Correlation Coefficient

Ab Global  Ab Concentrated

Poor diversification

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

Pair Corralation between Ab Global and Ab Concentrated

Assuming the 90 days horizon Ab Global E is expected to generate 0.91 times more return on investment than Ab Concentrated. However, Ab Global E is 1.1 times less risky than Ab Concentrated. It trades about 0.0 of its potential returns per unit of risk. Ab Centrated Growth is currently generating about -0.1 per unit of risk. If you would invest  1,632  in Ab Global E on February 4, 2024 and sell it today you would lose (1.00) from holding Ab Global E or give up 0.06% of portfolio value over 90 days.

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

Ab Global E  vs.  Ab Centrated Growth

Ab Global E

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global E are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Centrated Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Centrated Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Concentrated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Global and Ab Concentrated

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

The idea behind Ab Global E and Ab Centrated Growth 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.