Correlation Between Ab Global and New Perspective

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Can any of the company-specific risk be diversified away by investing in both Ab Global and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Ab Global and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and New Perspective.

Diversification Opportunities for Ab Global and New Perspective

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between GCEAX and New is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global E and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Ab Global i.e., Ab Global and New Perspective go up and down completely randomly.

Pair Corralation between Ab Global and New Perspective

Assuming the 90 days horizon Ab Global E is expected to generate 1.05 times more return on investment than New Perspective. However, Ab Global is 1.05 times more volatile than New Perspective Fund. It trades about -0.17 of its potential returns per unit of risk. New Perspective Fund is currently generating about -0.22 per unit of risk. If you would invest  1,634  in Ab Global E on January 19, 2024 and sell it today you would lose (43.00) from holding Ab Global E or give up 2.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ab Global E  vs.  New Perspective Fund

 Performance 
       Timeline  
Ab Global E 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global E 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 Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
New Perspective 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in New Perspective Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, New Perspective is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Global and New Perspective Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ab Global and New Perspective

The main advantage of trading using opposite Ab Global and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.
The idea behind Ab Global E and New Perspective 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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