Correlation Between Ab Select and Ab Equity

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

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

Diversification Opportunities for Ab Select and Ab Equity

0.98

Correlation Coefficient

Ab Select  Ab Equity

Almost no diversification

The 3 months correlation between ASCLX and AUIRX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Longshort 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 Ab Select 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 Select Longshort 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 Ab Select i.e., Ab Select and Ab Equity go up and down completely randomly.

Pair Corralation between Ab Select and Ab Equity

Assuming the 90 days horizon Ab Select is expected to generate 1.53 times less return on investment than Ab Equity. But when comparing it to its historical volatility, Ab Select Longshort is 1.42 times less risky than Ab Equity. It trades about 0.15 of its potential returns per unit of risk. Ab Equity Income is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,080  in Ab Equity Income on February 20, 2024 and sell it today you would earn a total of  234.00  from holding Ab Equity Income or generate 7.6% return on investment over 90 days.

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

Ab Select Longshort  vs.  Ab Equity Income

Ab Select Longshort

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Select Longshort are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Ab Select 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

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Equity Income are ranked lower than 12 (%) 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 June 2024.

Pair Trading with Ab Select and Ab Equity

The main advantage of trading using opposite Ab Select and Ab Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Select 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 Ab Select Longshort 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.