Correlation Between Ab Bond and International Equity
Can any of the company-specific risk be diversified away by investing in both Ab Bond and International 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 Bond and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Bond Inflation and The International Equity, you can compare the effects of market volatilities on Ab Bond and International 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 Bond with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and International Equity.
Diversification Opportunities for Ab Bond and International Equity
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABNCX and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and The International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The International Equity and Ab Bond 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 Bond Inflation are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The International Equity has no effect on the direction of Ab Bond i.e., Ab Bond and International Equity go up and down completely randomly.
Pair Corralation between Ab Bond and International Equity
Assuming the 90 days horizon Ab Bond is expected to generate 3.43 times less return on investment than International Equity. But when comparing it to its historical volatility, Ab Bond Inflation is 5.33 times less risky than International Equity. It trades about 0.41 of its potential returns per unit of risk. The International Equity is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,290 in The International Equity on November 8, 2024 and sell it today you would earn a total of 68.00 from holding The International Equity or generate 5.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ab Bond Inflation vs. The International Equity
Performance |
| Timeline |
| Ab Bond Inflation |
| The International Equity |
Ab Bond and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Bond and International Equity
The main advantage of trading using opposite Ab Bond and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Bond position performs unexpectedly, International 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 International Equity will offset losses from the drop in International Equity's long position.| Ab Bond vs. Needham Small Cap | Ab Bond vs. Rbc International Small | Ab Bond vs. Franklin Small Cap | Ab Bond vs. Ab Small Cap |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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