Correlation Between Ab Discovery and Basic Materials

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

By analyzing existing cross correlation between Ab Discovery Value and Basic Materials Ultrasector, you can compare the effects of market volatilities on Ab Discovery and Basic Materials 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 Discovery with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Discovery and Basic Materials.

Diversification Opportunities for Ab Discovery and Basic Materials

0.88

Correlation Coefficient

Ab Discovery  Basic Materials

Very poor diversification

The 3 months correlation between ABYSX and Basic is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ab Discovery Value and Basic Materials Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials Ultr and Ab Discovery 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 Discovery Value are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials Ultr has no effect on the direction of Ab Discovery i.e., Ab Discovery and Basic Materials go up and down completely randomly.

Pair Corralation between Ab Discovery and Basic Materials

Assuming the 90 days horizon Ab Discovery Value is expected to generate 0.73 times more return on investment than Basic Materials. However, Ab Discovery Value is 1.36 times less risky than Basic Materials. It trades about 0.07 of its potential returns per unit of risk. Basic Materials Ultrasector is currently generating about 0.05 per unit of risk. If you would invest  2,084  in Ab Discovery Value on May 18, 2025 and sell it today you would earn a total of  97.00  from holding Ab Discovery Value or generate 4.65% return on investment over 90 days.

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

Ab Discovery Value  vs.  Basic Materials Ultrasector

Ab Discovery Value

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Discovery Value are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Discovery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Basic Materials Ultr

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Materials Ultrasector are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Basic Materials 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 Discovery and Basic Materials

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

The idea behind Ab Discovery Value and Basic Materials Ultrasector 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.