Correlation Between Ab Bond and Ariel Focus

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

By analyzing existing cross correlation between Ab Bond Inflation and Ariel Focus Fund, you can compare the effects of market volatilities on Ab Bond and Ariel Focus 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 Bond with a short position of Ariel Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and Ariel Focus.

Diversification Opportunities for Ab Bond and Ariel Focus

0.85

Correlation Coefficient

Ab Bond  Ariel Focus

Very poor diversification

The 3 months correlation between ANBIX and Ariel is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and Ariel Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Focus Fund and Ab Bond 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 Bond Inflation are associated (or correlated) with Ariel Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Focus Fund has no effect on the direction of Ab Bond i.e., Ab Bond and Ariel Focus go up and down completely randomly.

Pair Corralation between Ab Bond and Ariel Focus

Assuming the 90 days horizon Ab Bond is expected to generate 9.96 times less return on investment than Ariel Focus. But when comparing it to its historical volatility, Ab Bond Inflation is 5.48 times less risky than Ariel Focus. It trades about 0.16 of its potential returns per unit of risk. Ariel Focus Fund is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,490  in Ariel Focus Fund on May 6, 2025 and sell it today you would earn a total of  276.00  from holding Ariel Focus Fund or generate 18.52% return on investment over 90 days.

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

Ab Bond Inflation  vs.  Ariel Focus Fund

Ab Bond Inflation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Bond Inflation are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ariel Focus Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Focus Fund are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel Focus showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ab Bond and Ariel Focus

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

The idea behind Ab Bond Inflation and Ariel Focus Fund 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.