Correlation Between Ultra Short and Ab Equity

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

By analyzing existing cross correlation between Ultra Short Term Fixed and Ab Equity Income, you can compare the effects of market volatilities on Ultra Short and Ab Equity 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 Ultra Short with a short position of Ab Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Short and Ab Equity.

Diversification Opportunities for Ultra Short and Ab Equity

0.97

Correlation Coefficient

Ultra Short  Ab Equity

Almost no diversification

The 3 months correlation between Ultra and AUIAX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Term Fixed and Ab Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Equity Income and Ultra Short 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 Ultra Short Term Fixed are associated (or correlated) with Ab Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Equity Income has no effect on the direction of Ultra Short i.e., Ultra Short and Ab Equity go up and down completely randomly.

Pair Corralation between Ultra Short and Ab Equity

Assuming the 90 days horizon Ultra Short is expected to generate 11.27 times less return on investment than Ab Equity. But when comparing it to its historical volatility, Ultra Short Term Fixed is 10.1 times less risky than Ab Equity. It trades about 0.22 of its potential returns per unit of risk. Ab Equity Income is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,126  in Ab Equity Income on May 7, 2025 and sell it today you would earn a total of  339.00  from holding Ab Equity Income or generate 10.84% return on investment over 90 days.

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

Ultra Short Term Fixed  vs.  Ab Equity Income

Ultra Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Term Fixed are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Equity Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Equity Income are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Equity may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Ultra Short and Ab Equity

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

The idea behind Ultra Short Term Fixed and Ab Equity Income 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.