Correlation Between Ab Global and American Funds
Can any of the company-specific risk be diversified away by investing in both Ab Global and American Funds 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 American Funds 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 American Funds Global, you can compare the effects of market volatilities on Ab Global and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and American Funds.
Diversification Opportunities for Ab Global and American Funds
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GCEAX and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global E and American Funds Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Global has no effect on the direction of Ab Global i.e., Ab Global and American Funds go up and down completely randomly.
Pair Corralation between Ab Global and American Funds
Assuming the 90 days horizon Ab Global E is expected to generate 1.0 times more return on investment than American Funds. However, Ab Global is 1.0 times more volatile than American Funds Global. It trades about -0.25 of its potential returns per unit of risk. American Funds Global is currently generating about -0.3 per unit of risk. If you would invest 1,650 in Ab Global E on January 20, 2024 and sell it today you would lose (58.00) from holding Ab Global E or give up 3.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Global E vs. American Funds Global
Performance |
| Timeline |
| Ab Global E |
| American Funds Global |
Ab Global and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Global and American Funds
The main advantage of trading using opposite Ab Global and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.The idea behind Ab Global E and American Funds Global 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.| American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund | American Funds vs. American Funds Income |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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