Correlation Between Small Company and Ab Value

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

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

Diversification Opportunities for Small Company and Ab Value

0.92

Correlation Coefficient

Small Company  Ab Value

Almost no diversification

The 3 months correlation between Small and ABVCX is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Fund and Ab Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Value Fund and Small Company 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 Small Pany Fund are associated (or correlated) with Ab Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Value Fund has no effect on the direction of Small Company i.e., Small Company and Ab Value go up and down completely randomly.

Pair Corralation between Small Company and Ab Value

Assuming the 90 days horizon Small Pany Fund is expected to generate 1.65 times more return on investment than Ab Value. However, Small Company is 1.65 times more volatile than Ab Value Fund. It trades about 0.12 of its potential returns per unit of risk. Ab Value Fund is currently generating about 0.16 per unit of risk. If you would invest  1,588  in Small Pany Fund on May 17, 2025 and sell it today you would earn a total of  122.00  from holding Small Pany Fund or generate 7.68% return on investment over 90 days.

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

Small Pany Fund  vs.  Ab Value Fund

Small Pany Fund

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Company may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Ab Value Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Value Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Ab Value may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Small Company and Ab Value

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

The idea behind Small Pany Fund and Ab Value 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.