Correlation Between Ab Discovery and Small Cap
Can any of the company-specific risk be diversified away by investing in both Ab Discovery and Small Cap 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 Discovery and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Discovery Value and Small Cap Core, you can compare the effects of market volatilities on Ab Discovery and Small Cap 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 Discovery with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Discovery and Small Cap.
Diversification Opportunities for Ab Discovery and Small Cap
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ABSZX and Small is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ab Discovery Value and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Ab Discovery 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 Discovery Value are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Ab Discovery i.e., Ab Discovery and Small Cap go up and down completely randomly.
Pair Corralation between Ab Discovery and Small Cap
Assuming the 90 days horizon Ab Discovery is expected to generate 1.02 times less return on investment than Small Cap. But when comparing it to its historical volatility, Ab Discovery Value is 1.28 times less risky than Small Cap. It trades about 0.22 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,368 in Small Cap Core on August 26, 2024 and sell it today you would earn a total of 94.00 from holding Small Cap Core or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Discovery Value vs. Small Cap Core
Performance |
| Timeline |
| Ab Discovery Value |
| Small Cap Core |
Ab Discovery and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Discovery and Small Cap
The main advantage of trading using opposite Ab Discovery and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Discovery position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Ab Discovery vs. Small Cap Core | Ab Discovery vs. Aquagold International | Ab Discovery vs. Morningstar Unconstrained Allocation | Ab Discovery vs. Thrivent High Yield |
| Small Cap vs. Aqr Diversified Arbitrage | Small Cap vs. Fidelity Advisor Diversified | Small Cap vs. Pimco Diversified Income | Small Cap vs. Evaluator Conservative Rms |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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